Glass-Steagall Act

• An investment bank main objective is to help corporations and governments in raising funds by underwriting activities. Merrill Lynch is an example of a good investment bank. In addition, investment banks also work as agents in the issuing of securities as well as mergers, acquisitions, and divestitures.  In order to be an investment bank, it has to have a broker-dealer license. The investment banks obligation is to governments and corporations. Nonetheless, the investment banks make money by individuals investing in the bank such as hedge funds and mutual funds, as well as individuals including other small investment. On the same hand, investment banks also underwrite and research securities and trade existing securities for cash or other securities to maximize profit for their investors.

Chase Manhattan is an example of a commercial bank. The specific role of a commercial bank is to provide service to the everyday people. These services include opening, depositing, and closing checking, saving, and money market accounts. The primary income for commercial bank is interest on loans, mortgages and fees. The commercial bank is for the average everyday person because the bankers accept deposits and pay interest on their accounts.  

Glass-Steagall Act

The main concept of Glass-Steagall was to solidify rules that commercial and investment banks have to be separate. In other words, commercial and investment banks cannot operate as one bank. However in 1999, the Glass-Steagall Act was repealed under the Bill Clinton Presidency. Since the Glass-Steagall Act was repealed, investment and commercial banks are allowed to operate under one location.

http://www.ratical.com/co-globalize/linkscopy/GlassSteagall.html





— ALJ Analysis

Glass-Steagall Act was good for the United States because it held banking laws in place, so that banks would not have too much power. However, I think that the repeal of the Glass-Steagall Act was a mistake. Investment and commercial banks should be separate. It maybe a conflict of interest when banks have to decide whether or not it is in their best interest to do business with  investors, governments, or consumers.  Moreover in the long run, bankers are going to sway to business deals that have greater profits, which are usually companies and the government. As a result, this leaves ordinary people like you and me with much hope.

In recent news, the government is considering to reinstate the Glass-Steagall Act. If the Glass-Steagall Act is reinstated, it will affect banks in the United States such as Goldman Sachs and JP Morgan Chase. For example, JP Morgan Chase would be required to separate their banks into commercial (Chase)  and investment (JP Morgan). In short, the banking cartel will have less control. In my opinion, the Glass-Steagall Act is what the United States needs to rejuvenate its economy.

http://www.mybanktracker.com/bank-news/2009/12/17/glass-steagall-act-may-make-a-return-some-lawmakers-say/

Irish Resist EU's Push to Accept a Rescue

The United States is not the only country that is having problems with the economy. In recent news, Europe is opposing $150 billion bailout to Ireland. Similar to the United States, Europe also has some resistance from its people. This resistance is not only with the Irish but also with its investors, which is Europe's main problem. It is hard to reinsure investor that the economy is stable, if the government is steadily giving money into its economy. There also speculation that investors are thinking about pulling out their large investments in companies and banks.

Ireland’s argues that its country does not need a bailout! Ireland is afraid that the bailout will downgrade its country’s ratings around the world similar to the United States. For instance in China, the United States no longer has a triple A credit rates because the US has been dumping so much money into its economy with no signs of rapid stabilization.

 http://online.wsj.com/article/SB10001424052748704327704575614861674707990.html

Chevron to Buy Atlas Energy for $4.3 Billion

The biggest topic of the day is that Chevron buys Atlas Energy for $4.3 billion. This is huge for Chevron because this allows the company to expand its market share. Chevron is already the second largest energy company in the United States. For Chevron, appreciate of the acquisition offers Atlas shareholders a little bit more for its bang for its bucks. Before Chevron completely takes over Atlas, the company would inherit $1.1 billion dollars in debt. Chevron’s deal with Atlas needs to go through a thorough process. Atlas area of expertise is natural gas; therefore, different restriction and regulations apply to acquisition.

http://dealbook.nytimes.com/2010/11/09/chevron-to-buy-atlas-energy-for-3-billion/?src=mv

Money as Debt

Have you ever thought about where money originated? How did it come into existence? There are videos on YouTube called Money as Debt. These videos explain the grand-scheme of money. In one of my previous blogs, I wrote about value and how it is determined. Essentially, I think that money and value go hand-and-hand. Do you know that the government is not the only source of money? Banks actually produce money. For more information, watch the videos below.

 



— ALJ Analysis

Money as Debt is an awesome video. It has given me great insight how money is made. It also explains in great detail how the value of money was created. All over the news, you will hear that the government is spending way too much money. After watching this video, one may ask, "Is the government actually spending this money?" My answer would be “no". The government did not actually produce billion of dollars and give the money to AIG and GM, or rescue the housing market. In examples like AIG, it was almost as if they went through a bankruptcy without filing. The government forgave all debt in order to seize the company. In short, money is only as valuable as people perceive it to be. Sure, people want to have the ability to buy products and obtain assets. But those things also have value. It is the way of life — or is it?

Boeing Swings to Profit

People fly ever day for work, vacation, or normal daily activities. I have read dozen of articles in my life that states the safety of airplanes. We, as Americans, never questions how these planes are made. Boeing is a company that makes countless number of planes each year. Boeing is known for the workmanship of Air Force One, as well as, its innovation and technology. Even with all these changes, Boeing was able to still increase its revenue due to recent demands in commercial planes.

Boeing has made a gigantic turnaround from last year’s profit loss of 1.56 billion, which is equivalent to 2.23 earnings per share. What did Boeing do so differently from last year? In 2010, revenue rose from 16.69 to 16.97 billion. Analyst speculates that the increase in commercial aircraft is responsible for the revenue jump. The strength in the commercial sector offsets the declining sales in the military division.

This year Boeing invested heavily in research and development. The company decided to revamp its older planes to make them more marketable to today’s buyers. With the military sector rapidly declining, Boeing has to find different ways to substitute for the company’s missing profits.   

http://online.wsj.com/article/SB10001424052702304741404575563943512256772.html

Rate Surprise Gets Revived by Chinese

Is China on the move? It has been approximately two years since the People's Bank of China moved its interest rates. The bank usually has surprises when it comes to making a move within the market. Effective on Wednesday, October 20, 2010, the People’s Bank of China is increasing its one-year lending and deposit rates by one-quarter of a percentage point each. However, this was most unexpected especially to the Chinese.

Most analysts and researchers suggest that this will cause a domino effect on the Chinese economy. Consumer price inflation has already crossed above Beijing’s goal of 3 percent, which was its target for 2010. In August, the annual interest rate was three and a half percent. Because of the interest rate change, The People's Bank of China is raising interest rates on everyone from local governments to companies to mortgage holders all of which are taking on extra debt.

ALJ Analysis

After doing intense research on China and the United States economy, I am concerned about America’s economic future growth. Not to take away from China’s success, but the United States in my discretion seems to be unbalanced, while China is becoming more economically stable. For instance, even though the People’s Bank of China raised interest rates, it supposedly affected certain groups such as local governments, companies, and mortgage holders; it consequently has had an adverse affect on the world’s economy. China could increase the interest on what the United States owes its country; the debt is presently $894.8 billion.

Intel Sees Strong Corporate Demand

Intel is a corporation that makes approximately 80 percent of the world’s computer chips. The company prognosticated that there will be strong corporate demand. In recent data, the company’s third quarter has produced more than Intel expected, with an increase of 18 percent and $11.1 billion in revenue. Intel is on the move! The company third quarter gross margin has also increased from 57.6  to 65.9 percent with an additional increase in stock price from 33 to 52 cents per share.

Intel is a driving force when it comes to computing technology. The company has an unbelievable amount of cash flow, which is invested wisely in the company’s research and development. Intel is known for high-quality and magnificent innovation. I can predict that Intel will continue being a leader in computing technology for at least the next three decades.

http://online.wsj.com/article/SB10001424052748703440004575548460171405050.html?mod=WSJ_earnings_LEFTTopHeadlines

Horace Mann's Jailed CEO Resigns His Posts

When it comes to the law, there are no exceptions not even to high powered Chief Executive Officers (CEO) of a major corporation. On September 8, 2010, Horace Mann's Educator CEO, Louis Lower, resigned his post for pleading guilty to a misdemeanor charge of driving under the influence. He also decided to remove himself from the Horace Mann's board.

Lower has been with Horace Mann for ten years. Apparently, according to co-workers and friends, Lower has been a big asset to the company. Even though he posted profits every single year since 2000, Horace Mann profits dropped seven percent. There could be numerous reasons for this decrease, for example, the 9-11 attacks, and the collapse of major corporations like Enron.

http://online.wsj.com/article/SB10001424052748704689804575536412231501950.html

The Untold Story of TARP

Unless you have been living under a rock for the last decade, the world's economy has been sinking relentlessly. Nonetheless, statistic shows the economy is slowly progressing. Supposedly one of the reasons for this progression is Trouble Asset Relief Program, which is also known as TARP money.

TARP money is the same cash that the government used to bail-out Wall Street, General Motors (GM) and Chrysler. Nonetheless, TARP is a dirty word when it comes to politicians and people because no one thinks it is fair to bail-out irresponsible CEOs or heavily greedy individuals. But is that really case?

Scenario one: If the government does nothing.

Say, for instance, the government did not do anything and just let GM suffer. So, GM files for chapter 11 Bankruptcy. The company does not officially go all the way down in the tubes, but GM starts to layoff hundred of thousand employees. This would have directly affected the U.S. capitalism structure because unemployment and people without health insurance benefits would have increased. Additionally, businesses and consumers spending level would have decreased. Conversely, the economy would have fallen or would have been at a stalemate.

Scenario Two: If the government rescues companies and banks.

Say, for example, the government decides to invest and save GM. In this scenario, there are still working people with benefits, the government does not have to pay unemployment, and consumers can continue to spend to enhance the economy. In addition, let us not forget the stockholders, even though most of GM is government owned; the stockholders still did not lose their total investment.

ALJ — Analysis

In life when it comes to complicated matters, it is never an easy fix; however, in an economy, there are billions of lives to consider.  Sometimes our leaders make decision without the input of the American people. In any given situation, it is harder to come to a profound conclusion when there are more people deciding on a solution. The American people elect government officials to make tough choices for them.

When it comes to TARP, the government should not be so hasty to spend tax payer's money. In one of President Barrack Obama speeches, he stresses the significance of the government intervening by helping banks and troubled companies. In addition he also stresses the point that the government cannot just sit back and do nothing. In economic theory, the government made the right choice. If consumers cannot spend, businesses cannot spend, and banks cannot lend, then government has to step-in.



http://blackheywood.newsvine.com/_news/2010/10/03/5223715-the-untold-story-of-tarp

Gold Jumps to Another Record

Can the U.S. dollar strengthen the value of gold? According to the Wall Street Journal, as the U.S. dollar value continues to decline, the value of gold continues to rise. Even when trading with other countries, they would rather accept gold as a form of payment. Some analyst speculated that gold will eventually surpass the dollar and will be the currency of choice for the United States. However in this broken economy, gold is not the only metal that benefited; silver and platinum has also made a significant increase in the market. In addition, the euro catapulted to a six month high and traded at $1.3735. Meanwhile, as the value of gold continues to soar, so do jobs related in that industry. The needs for miners have increased. Additionally, the mining companies are already forecasting their production to increase for future profits. 

http://online.wsj.com/article/SB10001424052748703859204575525622535547074.html

McDonald's May Drop Health Plan

Is this the future for America? It is speculated that McDonald's, the largest fast-food chain is planning to drop its health insurance coverage for its employees, according to the Wall Street Journal. McDonald's has denied this sensational claim, but the company did say that it wants to improve the company's health insurance options. This announcement of McDonald's dropping its health issuance has benefited the company. McDonald's' stock has increased by seven percent since mid-July.

If McDonald's does drop its health insurance then there will be approximately 30,000 restaurant workers that will either go on the government plan or buy their own insurance. McDonald's has disagreements with the federal regulator requirements. One of the requirements that has McDonald in a frenzy is called the minimum medical loss ratio. This requires the company to allocate a portion of its revenue received on premiums and spend it on benefits. Currently, McDonald's has limited benefits for its employees. These benefits do not meet the government standard, which mean in order for the company to comply, McDonald's would have to spend more. This could cause a downward slope for a fast-food chain like McDonald's. The company already spends approximately 80 to 85 percent of its net income on overhead cost. With the addition of health insurance, the company’s profits would surely decrease. However; there may be hope for the low-wage employers. The government is considering either a waiver or reducing requirements.

ALJ — Analysis

McDonald's is not the only company that is having a tough time embracing regulations for new health insurance.  Most people would say that employees need great benefits, which is easier said than done. Businesses are in business to make a profit! During rough times, businesses have to make tough decisions, which could entail laying off workers, eliminating raises and job positions. No one wants to see the reduction of jobs, but businesses have to think about their bottom-line, which result in satisfying investors.  

http://online.wsj.com/article/SB10001424052748704789404575524502131067836.html?KEYWORDS=McDonald%27s+May+Drop+Health+Plan 

House Lashes Out at China

Will things get ugly between Untied States and China? I read an article in the Wall Street Journal that the U.S. is lashing out on China to raise the value of its currency. China is taking advantage on having a devalued currency because China can sell its products inexpensively with the intentions of profiting more. With America's weak economy, this is adding fuel to the fire. America's Secretary of Treasury Timothy Giethner has already threatened congressional action towards China. Even President Barrack Obama, has had a few choice words to China's regarding currency freedom and how is it affecting America.

However; Wang Baodong, the Chinese embassy spokesman in Washington, was dumfounded about the publicizing of the Chinese currency. He believes that this ordeal would divide the U.S and China on so many levels. He also stresses the importance of trade relation between China and the United States.  Nonetheless, Obama administration expects other nation to also pressure China into freeing its currency. It is already speculated that Europe and Asian countries have been complaining about Chinese currency practices.

Economist — Analysis

Most economists have drawn the conclusion that China is definitely benefiting from devalued currency. Let's take exporting for instance; since the Chinese currency is below its value, this gives China a huge competitive advantage against U.S. exporters. This also put tremendous amount of pressure on the American steel makers and machine-tool producers.

ALJ — Analysis

When dealing with currency, exporting, and tariffs, there are many variable that one may consider. For instance, how is it going to affect overall strategic and tactical planning on a country whether it is the United States or China. China has clearly taken advantage of having devalued currency. It is speculated that the Yuan is closely valued with the American dollar. If this is true, America has big problems considering the U.S. dollar is sliding tremendously. In addition, China is heavily invested into the United States by buying land and contributing funds indirectly to the government official banks.

America has to take small steps when its approaches China whether it is freeing its currency, disarming nuclear weapons, or congregating global plans. According to the Wall Street Journal, China holds 894.8 billion in U.S. security, which means that the majority of the U.S. debt is to China.  However, China agreed to buy some of the U.S. debt. The fact of the matter is that China needs the United States to buy goods and services; in order for the Chinese economy can continue to grow. Because the U.S. is in debt to China, how much pressure can the U.S. put on China to let its currency flow freely in the market?

http://online.wsj.com/article/SB10001424052748704116004575522401651849766.html?mod=WSJ_Markets_LeadStory

http://online.wsj.com/article/SB10001424052748704093204575216680676960908.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird

Citigroup Sheds Its Student-Loan Department

 Citigroup announced on Friday, September 19, 2010, that the company was planning to sell its student loan business and $32 billion in related assets. Citigroup currently has $1.94 trillion in assets and $413 billion in long-term debt. Additionally, the company also has $1.78 trillion in other liabilities. Citigroup has large amounts of assets that are not easily converted into liquidity. This means it is harder for Citigroup to transfer its assets into cash if the company needs to pay off its short-term debt. In addition to Citigroup high debt in the fourth quarter of December 31, 2009, the company’s net income to common was a negative $7.58 billion. In August 2008, Citigroup agreed to buy-back $ 7 billion of bad debt.

Citigroup's troubles started when the housing crisis loomed; conversely, the majority of the loans went into default. People were not even paying on their principles. The company’s plan is to sell some of its assets to pay down its long-term debt. So society asks, "Why is Citigroup selling its student loan business?" To answer the question, the government also announced that it will no longer protect private student loans. These loans were for students who wanted to get additional loans while they were in school to cover additional expenses. Neither subsidized nor unsubsidized loans were affected. However with a broken economy, who knows what the future will bring. 

http://online.wsj.com/article/SB10001424052748703904304575497812285217790.html

Microsoft Raise Dividends, Authorizes More Debt

In business in order to increase growth within a company, having debt is a necessity. On September 22, 2010, Microsoft raised its quarterly dividends by 23 percent to 16 cents per share, which is the first increased in two years. Microsoft is one of the cash-richest companies in the world. The company has approximately $37 billion cash and cash equivalent on the balance sheet. There has been speculation that Microsoft is being pressured to spend more cash.

Microsoft, the world largest software company, is always driving the latest and greatest technology. The company has a budget of $7 billion in research and development. Microsoft also has had intense cash flow within the last four quarters; the company’s net income cash flow increased by $15 billion. Microsoft is a company that always seems to produce. Just like every other American, I cannot wait for Microsoft's next great innovation.

http://news.yahoo.com/s/nm/20100922/bs_nm/us_microsoft_dividend

Do Bill Gates and Warren Buffet Know Something We Do Not?

During the past few years, Bill Gates and Warren Buffet have been buying massive amount of stock in the same company. It is speculated that this company could make Gates and Buffet a quick return with high profits. The Security Exchange Commission (SEC) discovered this behavior by examining Berkshire Hathaway's SEC form 13F-HR/A.  According to SEC research, both Gates and Buffet in 2008 and 2009 bought on average abundance shares of stock 62 times. Gates and Buffett, two of the world richest man, invested approximately 1.9 billion shares in this company.

ALJ — Analysis

After performing intense research, it is concluded that Gates and Buffet have made a smart investment. The company that Gates and Buffet wisely invested in is under secrecy. In fact, I could prognosticate that the company is more risky to invest than other companies because it is speculated to have quick returns with high profits. If I were going to invest any of my money in a company, and I had to hand pick two people to follow; Bill Gates and Warren Buffet would be my top two choices!

http://web.streetauthority.com/land/buffett/buffett-gates-1-9-faq-out.asp?TP=477&ref=ws247
http://www.nydailynews.com/money/2010/06/16/2010-06-16_bill_gates_and_warren_buffett_ask_oprah_bloomberg_other_billionaires_to_give_big.html

Who Can The Investors Trust?




What DO Your Investmens Look Like?

On September 18, 2010, the Security Exchange Commission (SEC) is one step closer in revealing those companies that dump their debt at the end of each and every quarter.  Some companies would dump their debt to increase profits, so they could look better in the eyes of their investors, which gives false representation. As a result, the SEC unanimously voted to implement a practice called window dressing. This will help investors to spot firms who slash their debt before quarterly earnings.

As an investor, I do plenty of research before I decide to invest in a company. There is no set statement that investors analyze to determine whether they should invest or not. Of course, annually or quarterly statements can give investors a prognostication on what direction a company is heading. Or does it? In history, Americans have learned that anything can be manipulated. For instance in late 2001, the infamous Enron scandal came to an end. Enron was known from deregulating electricity to monitoring and selling broadband waves in the air. The reality was that Enron was a house of cards! The company manipulated annually and quarterly earnings, lied to investors and analysts, as well as committed one of the biggest deceptions in American history. This was fraud on massive level. Enron had help from a highly reputable accounting firm, Arthur Anderson, well-known lawyers, and trustworthy banks.

In the near future, I  do not know if implementing the window dressing is going to help stop businesses from committing fraud or give investors a better insight whether to invest or not. I support the SEC for cracking down on rules and regulations. If investors are going to invest, they should have a true representation of the company.

http://online.wsj.com/article/SB20001424052748703904304575497661581547790.html

http://www.enron.com/

How Do You Determine Value?

 

What is the value of this car?

I came across this interesting topic while shuffling through some notes from my Business 501 class. In theory, everyone has his or her own definition of value. In mathematics, there is an absolute value. However, in life, is there a real definition for value?

When you shop for a product at Radio Shack, Target, or Wal-Mart, what do you consider a great value? Is it price, brand name, and/or accessibility? People’s values tend to alternate over time. I remembered in 2001 when the World Trade Center was hit, and the economy was sliding down the tubes. Gas prices were at its all time high and people traded their SUV's for four cylinder cars. It was a crisis! People’s values tend to change as their spending habit decreased. The products that customers normally considered cost effective and high quality were substituted. In today’s society, consumers are utilizing the tools they need in order to be more price conscious­, for instance, comparing prices on the Internet. Even when consumers purchase products over the Internet, it takes time to receive the merchandise. Consequently, what is more important to consumers — value or convenience.

However, value is not always getting good prices and saving money. For example, have you ever seen something on eBay that you would never find in stores? Alternatively, went to a store solely because you knew that a certain product was sold their exclusively; these are examples on how value is created.  

People every day subconsciously think about the value factor whether they know it or not. The next time you go to lunch and purchase a Big Mac meal or Subway sandwich, ask yourself if that product is worth the six dollars. If yes, that product has a value. If no, you will substitute, or go home hungry. Value to me is more willingness versus needs.  How much you are willing to pay or sacrifice in order to receive what you desire. What does value mean to you?



10 Mistakes That Start-up Entrepreneurs Make!

A.L.J said, "There are no excuses of not knowing, if the research is out there to gain the knowledge." In keeping with this quote, I read an article in the Wall Street Journal about the ten mistakes that start-up entrepreneurs make. This article explains in detail what strategies anyone should do if he/she wants to be a successful entrepreneur.

Out of the ten mistakes, there were two of them that intrigued me the most. For instance: Did you know that you can have too much start-up capital, or you can ask too many people for advice? According to Rosalind Resnick, the writer of this article, businesses that have too much start-up capital tend to linger away from their mission. Companies have an inclination to hire more employees than expected and waste valuable resources. The article suggests that companies save their leftover capital for a rainy day.

Can you ever do too much research? According to this article, you can! When you start-up a business, you should do intense research. But do not search too long! People who get advice from too many people tend to procrastinate. I strongly recommend business professionals to read this article; it is definitely informative and an eye opener.

.http://online.wsj.com/article/SB10001424052748703467004575463460389523660.html?mod=WSJ_hp_mostpop_read

Will the New Health Insurance Plan Help or Hurt the American people?

Will there be a shortage of medical doctors within the next fifteen years? Like every other American, I weighted the pros and cons about this new health care bill. Recently, President Barack Obama signed a bill that stated it is mandatory that every American has health care insurance. As an American, I supported that bill. I believe that every American should have the right to get an education. So why should health care be any different?

I believe that people who major in the medical field should get free education! President Obama gave billions of dollars to teachers, to help other countries, and to simulate the economy. Why not invest in universities to entice students to enter the medical field? As a business student, I can respect student's decision on not entering into the medical field. The majority of the medical doctors have unbelievable debt once they finish their residency. There is also speculation that medical doctors and nurses will have a salary cap, which means that the government will decide their salaries. I guess like every other American, I have to wait and see if this bill will help or hurt the American people!

http://online.wsj.com/article/SB10001424052702304506904575180331528424238.html?mod=WSJ_newsreel_careers