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Amidst Doom & Gloom and negative results and share price meltdowns, one company has shown the way with impressive 2008 profits and growth despite its industry suffering heavily as consumer demand dropped.

Danish toy maker LEGO is that company and they have just announced their 2008 results with an impressive 32% increase in year-on-year profits and 19% increase in its revenue from 2007.

How did that come about ?

BusinessWeek reports :

Lego said it saw strong sales in its City, Star Wars and Indiana Jones product lines, even though the global toy market declined because of the economic downturn.

The Telegraph elaborates on how this impressive result has been brought about by pointing to LEGO’s venture into well-known film brands and blockbuster movies :

Lego, which estimates that children spend 5 billion hours a year playing with its multicolored bricks, has bought licenses from movie makers including Lucasfilm and Walt Disney to fend off competition from electronic toys and computer games.

The article also highlights that some of the success in 2008 was derived, in LEGO’s own words, from the company having been through a major crisis some years before which had now put the company in a good position to weather the storm :

“We’re dodging much of the effect of the financial crisis, probably because we went through our own crisis a few years ago and now have a strong, streamlined company,” Chief Executive Officer Joergen Vig Knudstorp said.

The toymaker cut costs and more than 1,000 jobs after reporting its two biggest net losses in 2003 and 2004.

Lego’s share of the global toy market rose to a record 3.6pc last year, from 2.9pc in 2007, Mr Knudstorp said.

Global market share of the toy market rose to a record 3,6% from previous 2,9% and the company is also moderately optimistic when it comes to 2009 :

The company expects to increase its share further this year as revenue will grow between 3pc and 7pc amid a “moderate decline in the overall market, he said.

Lego’s royalty payments to license holders rose 32pc to 639 million kroner. The company also produces “Batman” and “Harry Potter” building block sets.

“We’ve had much success with ‘Indiana Jones,’ but now we’re looking for new license products,” Mr Knudstorp said. Lego will introduce its first building block sets based on a Disney Pixar animation movie in 2010, after signing a license agreement with Burbank, California-based Disney this month.

Profit next year will be “satisfactory compared with 2008’s level, when considering the global situation,” Mr Knudstorp said.

The Danish company remains privately owned and its main shareholder, Mr Kjeld Kirk Kristiansen, is according to Forbes.com  now the 145th- richest man in the world with a net worth about $6.5 billion.

Not bad for a company that produces plastic  bricks and who estimates that that children spend 5 billion hours a year playing with its multicolored bricks.

How it all works, Investment News Forbes.com, Kjeld Kirk Kristiansen, LEGO, Toy Industry

Whilst the IT sector is suffering along with all other sectors of business during the global recession and downturn, the IT sector stands out in one very conspicuous way : It is to a large extend a very cash rich industry sitting on huge piles of cash !

None less so than IT giant Cisco Systems Inc. who sits an impressive second on S&P’s 500’s Richest Companies list only after Exxon Mobil Corp with close to US$ 30 billion in cash in the bank.

Now analysts are beginning to wonder what Cisco will do with all that cash and whilst paying back shareholders through buy backs of shares is one obvious option, most seem to think that Mr.Chambers, Cisco’s CEO,  is actively looking into acquisitions now.

Andrew Schmitt of SeekingAlpha.comhas this observation on Cisco’s near future moves :

We acknowledge it is entirely possible Cisco is filling a war chest for acquisitions. Everyone loves to play the who-will-Cisco-buy-next-game (our longstanding bet is Adtran (ADTN)). Cisco CEO John Chambers answered questions in his typical guarded way during an interview last month, indicating “The perfect target is a company with 100 people and a hot product that customers are saying they should go out and buy” and “We do not believe in the acquisition of large peers in any space.”

Cisco could fund such small acquisitions out of working capital, and any large acquisitions could be funded by a bond offering after the announcement, just as they did with Scientific Atlanta. This forces one to ask the question – why did Cisco just decide to triple the amount of cash it has for domestic use if we assume it isn’t for acquisitions?

Schmitt also sees another strategy by Cisco for putting its massive cash pile to good use which he headlines The Bank of Cisco :

We believe Cisco is growing operating cash in order to serve as a lender of last resort to its distributors and customers. An expanded balance sheet will ensure adequate capital is available not just for its own operations, but also the operations of its channel partners and customers.

If a key distributor were to suddenly lose a line of credit because the bank underwriting it implodes, Cisco can step into the breach and act as lender. If a contract manufacturer cannot obtain inventory financing Cisco can extend terms. Just as the Federal Reserve is the lender of last resort for the nations banks, Cisco can become the lender of last resort for the supply and demand chain.

So helping their partners and distribution networks to survive by extending credit lines sounds like a smart move indeed and Schmitt argues well that Cisco’s lower cost of capital is indeed a very useful weapon against its main competitors and not least the likes of HP and Huawei who are nowhere near as cash rich as Cisco.

But who will or should Cisco be buying then ?

MarketWatch’s Benjamin Pimentel, has this menu to suggest :

Chief Executive John Chambers himself has hinted strongly that the company is looking to extend its reach, but he has not yet specified a direction.

Data centers

“We believe that our opportunities to expand in our current markets, market adjacencies, are actually increasing,” he told analysts in last week’s earnings call. “This is true from the data center to the home market and the service provider to the small business and consumer. … You will continue to see us invest aggressively where appropriate.”

It’s a logical strategy, according to analyst Roger Kay of Endpoint Technologies Associates, who said Cisco is one of those companies that “invests for the future” in down times.

“It has to diversify,” he said. “It can’t stay in just networking forever.”

But where should Cisco look to expand?

Given the company’s position as a major player in the market for technology used by big companies, some analysts are naturally focusing on the enterprise arena. For instance, there’s much speculation that Cisco is planning to enter the blade-server market, where it would end up battling it out with the likes of Hewlett-Packard.

Investment News, Investment opportunities, US Investments Cisco, Data Center, Huawei, IBM, IT

Every retailer expect and need surging sales in Q4 peaking with Xmas sales and it is no different for the E-tailers, traditionally led by eBay and Amazon.com.

Lately, however, whilst traffic and revenue figures have continued to grow for fixed-price online E-tailer Amazon.com, the picture is quite different for auction site eBay who is seeing a drop in year-on-year traffic and sales figures. this year. And that worries observers of the industry who are now asking themselves whether eBay has got what it takes to turn around this negative trend and win back its lost market share and end-users.

This post looks into the problems at the heart of eBay and what experts and analysts have to say about this falling giant who only a few years back was synonymous with E-tailing.

Christopher Lawton of Wall Street Journal points to the dropping performance by eBay as being primarily caused by customers who now seem to favour the fixed-priced sites such as Amazon.com and where eBay has less of an edge and also because of continued problems with unscrupulous sellers which make customers turn to other sites with better control over the purchase process:

Weekly traffic to the auction site fell 16% between Nov. 3 and Dec. 14 from a year ago, according to research firm comScore Inc. In contrast, Amazon.com had 6% more unique visitors during the same period.

The weakness is showing up in the sales of eBay sellers such as Gary Meyer. Mr. Meyer owns Gem Enterprises Inc. in Merchantville, N.J., which lists more than $300,000 in tech equipment such as printers on eBay. So far this holiday season, Mr. Meyer’s sales on eBay are down 30% to 40% from a year ago, he says. “We’ve geared up our Web site more and started listing on Amazon.com and other venues,” Mr. Meyer says.

Mr Lawton continues by hinting that after the change a year ago of their CEO from Meg Whitman to Mr John Donahoe, the company’s strategy and course are now more confusing to users and analysts alike as new initiatives trying to win back lost clients seem to have led to mixed results and so far not encouraging financial results:

EBay performance this quarter could be a referendum on the changes Mr. Donahoe has made this year. Since taking over for former CEO Meg Whitman in March, Mr. Donahoe has sought to rev up growth and reclaim buyers who had stopped visiting the Web site.

His most significant move has been to make eBay less of an auction house and more like Amazon, Walmart.com and Sears.com, selling fixed-priced goods, which consumers now prefer for speed and convenience. Among other changes, Mr. Donahoe has cut the fee to list fixed-price items on eBay and boosted the fee charged when an item sells, a model that helps fixed-price sellers better set profits.

Yet the changes have so far had little financial impact — and have angered many loyalists. Transaction revenue per listing between October and the end of November plunged 28% from a year ago to $1.44, according to Majestic Research. Wall Street analysts now estimate the San Jose, Calif., company will post its first year-over-year revenue decline when it reports fourth quarter earnings next month. Seattle-based Amazon has forecast an at least 6% increase in fourth quarter revenue over last year.

“We haven’t observed…any material positive changes on the buyers’ side of the equation,” at eBay, says John Aiken, managing director with Majestic Research.

The fact that the purchase process is faster and less complicated on fixed-priced sites such as Amazon.com should not in some experts’ views make eBay abandon their core strategy which is all about offering consumers the chance to sell and buy at flexible prices. Lately, however, eBay has under its new leadership of John Donahoe been encouraging sellers to offer items at fixed prices, making it appear more like a traditional online retailer.

Stephen Foley of UK-based The Independent quotes Laura Martin, a media analyst at Soleil Securities for putting the blame for this wavering strategy at the top of the company:

Consumer spending numbers are going down for all retailers, but eBay has particular problems because it is becoming increasingly difficult for customers to find the deals that they want on there, amidst all the clutter of fixed-price items. I don’t understand why eBay is making itself more like their competitors instead of less.”

Michael Fowlkes of Bloggingstocks  reminds us that eBay is still the King of e-commerce but he does acknowledge that there are problems facing the giant especially as Amazon’s traffic and revenue numbers continue to grow despite financial crises:

While it is true that eBay has been seeing a large number of users defecting to other popular e-commerce sites such as Amazon, Walmart.com and Sears.com, it is also important to note that eBay is still the king when it comes to e-commerce, and the site is still sitting on three times the volume of its competition. Regardless, the writing is on the wall, and the site is doing all it can to move quickly into the fixed-price marketplace that has been gaining steam over the past couple of years.

Mr Fowlkes goes on to point out that eBay could find themselves in the classic stuck-in-the-middle strategy if they are not quick to clearly define what their business and service is all about to end-users and investors alike:

It is a tough situation for eBay as it tries to aggressively redefine itself. For a company that has built itself on the back on the auction business, a too rapid and aggressive move into the fixed-price business is definitely going to ruffle a few feathers. The company has to try its best to appease its current sellers while at the same time moving as strongly as it can to keep and regain buyers, all the while trying to entice new shoppers into the site.

Some sellers have voiced disapproval, stating that the company is moving too quickly into the fixed-price business, and that their loyal customers are still more interested in finding the lowest price merchandise available, which is often achieved through the auction side of the business.

Though it remains a fact that eBay has many loyal users and bidders, there seems to be a trend among consumers lately to prefer the no-nonsense fixed-price sites to the auction based ones with speed, convenience and assurance to get the item one wants being the key reasons for consumers preferring an Amazon type online offering to the auction based ones which eBay invented and still rules.

So when Amazon is about to officially record its best ever Xmas sales, eBay is about to record declining sales for the first time in its operating history and one has to ask the question if eBay’s strategy is the right one moving forward?

How it all works, Investment Company, Investment News, Online Investment, US Investments Amazon, E-Tailers, eBay, Online shopping

In recent years, well almost a decade now, leading economists and financial analysts from all over the world have been amazed by what has been termed by many as The Dubai Miracle which tells a story of a city’s explosive and phenomenal growth and expansion, real estate projects on a scale that would be large even by US or Chinese standards and announcements of further growth and developmentsthat make even the most gung-ho developers dizzy.

Recently many of us thought we had it wrong when reading about the latest plans in Dubai to have one of its prime beaches cooled down artificially for the benefit of the guests at the hotel (read the full story on this here) but then again we are talking about Dubai - a place where everything seems to be possible.

Lately, however, Dubai has started to feel the effects of the major world financial crisis, despite strong government and semi-government statements from as recent as November (click here to read Mr Mohammad Al Abbar’s statement from November) refusing to agree that Dubai would be sucked into this global financial turmoil.

There are now clear signs that Dubai is beginning to suffer too, not least in its major real estate sector where most of the major projects are focused but also its tourism sector, and there are now many voices of concern and unhappiness emerging from consumers and investors alike not to mention the financial institutions who are heavily exposed in this massive project called Dubai.

This blog looks into some of the signs and concerns that are now facing Dubai and asks the questions whether the Dubai Miracle is coming to an end or if in fact they will somehow come through this crisis stronger and better than before.

The Wall Street Journal tells a story about Dubai lenders beginning to feel the squeeze as mortgage defaults by overstretched borrowers is now becoming common:

Borrowers are being squeezed by higher interest rates and job cuts by major employers hurt by the global financial crisis. Property developers also were affected Sunday as tumbling oil prices hurt sentiment, leading the region’s stock markets lower.

As borrowers run into trouble, officials at HSBC Holdings PLC, the largest international bank by assets offering mortgages in Dubai, told Zawya Dow Jones that the lender has been contacted by a growing number of customers in the emirate struggling to pay their home finance.

At Emirates NBD, the Gulf’s largest lender by assets, an official said the bank has witnessed “significant defaults from the speculative community.” However, the official wouldn’t disclose if the bank itself has been experiencing defaults.

The same article from WSJ goes on to point out that even though banks and lenders have the right to re-possess properties from clients if they default, there is no precedence for foreclosures in Dubai which could lead to additional worries and problems for the financial institutions who are heavily exposed in the property market:

Although new mortgage laws say banks are entitled to repossess a property if a borrower defaults on a mortgage for more than 60 days, experts said foreclosure may be a lot more difficult in practice.

“There is a mechanism in place for foreclosures, but it’s never been tested before,” said Charcol’s Mr. Dommett. “In practice, the process could take a very long time, and banks could be left with property on their books that they’re unable to sell.”

Local Dubai-based newspaper, Gulf News, tells a story on how several companies are now struggling for finance and credit and how they are trying to raise cash from investors:

Dubai-based property developer Union Properties said Monday that it wanted to issue up to Dh2.5 billion of convertible bonds, as securing project financing from banks had become difficult during the financial crisis. Convertible bonds allow investors who have lent money to companies to change the debt into shares in the business.

Also, Shuaa Capital, a leading regional investment bank said on Monday it would seek shareholder approval next month to extend the maturity of its convertible bonds.

“The signal is that they need cash. Banks will not give you cash now or they will do it with too many conditions. Selling bonds is a tool to get money and the strategic investor is entitled to an interest dividend of 6 or 7 per cent,” said Hamood Abdullah Al Yasi, general manager at Emirates International Securities on Monday.

 Meanwhile, and perhaps rather surprisingly amidst the majority of observers being quite possimistic about Dubai’s economic outlook, Swiss banking giant Credit Suisse has reiterated a positive outlook for Dubai’s troubled real estate sector as business daily Emirates Buisness 24/7 reports:

Swiss bank Credit Suisse has reiterated a positive outlook for the UAE property sector, as it believes that real estate market will recover quickly from the current turmoil due to the country’s solid macroeconomic fundamentals.

“As a result of a slowdown in economic growth and liquidity challenges in the GCC region, we downgrade our target prices for most real estate stocks in the UAE. However, we stay overweight on the sector as we believe the UAE real estate market will recover quickly from the current turmoil thanks to its solid macroeconomic fundamentals,” the bank said in a report titled “Emea Real Estate Outlook 2009.”

The article goes on to quote Credit Suisse for predicting that both the Dubai and Abu Dhabi governments will have the biggest effect on the future of the real estate sector:

The bank believes that there are three potential catalysts that should be monitored in the short term: Oil prices, which have a strong effect on the UAE’s liquidity and hence the real estate market. Any sign of upside in oil prices would be viewed as positive news; bringing the real estate sector under the umbrella of the federal government, which is dominated by Abu Dhabi, thus ensuring the availability of liquidity; and positive news about the condition of the real estate market in Dubai.

“We believe that the market is discounting most of the negative newsflow about the lack of funding, shortage of mortgage availability and the fact that Dubai is a highly leveraged market in a global credit crisis. In our view, it even assigns a zero value for some projects in the pipeline for some UAE developers. We expect that developers will cut supply as demand deteriorates as a result of negative sentiment and the shortage of liquidity, which will in turn affect their forward NAV as they sell fewer units than expected.”

The article goes on to quote Credit Suisse for saying that the governments must control and also cut the supply of real estate projects in order to avoid a collapse and get back on track:

Credit Suisse believe that cutting supply to keep a sustainable level of demand will not be enough without an effective solution for financing problems in the UAE, especially on the demand side.

“We think that the UAE federal government (through sovereign funds) will have to play an active role in providing financing for both home buyers and developers, as the financing situation, especially in Dubai, is currently under pressure.”

The old question of whether Abu Dhabi, which is where the Federal Government sits and also where 90%+ of all UAE’s oil revenue stems from, is truly committed to financing and underwrite Dubai’s massive real estate expansion, is also highlighted by Credit Suisse as a key factor to the recovery:

“We are confident that the Abu Dhabi government is still committed to financing development projects in the emirate and will provide the required support for those projects. However, we think the most important question is, will the federal government, which is dominated by Abu Dhabi, provide financial assistance to the real estate market in Dubai?

“We believe it is in the interests of the UAE that the Dubai market remains sustainable and think the federal government may step in to make sure that the real estate market in Dubai doesn’t go into a deep slump because of the current shortage in liquidity. However, it is difficult to determine the form of this involvement. We also believe that there is likely to be some sort of consolidation among developers in both emirates, thus bringing the sector under the umbrella of the federal government in the future,” Credit Suisse said.

What the next chapters in the Story of Dubai have to reveal only time will tell but it goes without saying that Dubai’s growth and expansion till date as spearheaded by its visionary ruler Sheikh Mohammed Bin Rashid Al Maktoum has been a truly amazing story to follow and whilst many analysts and economists now remain cautious if not pessimistic about Dubai’s future and ability to come through this current and deepening crisis unscathed, this author would not put it past Dubai to come out on top - once again.

This blog will continue to follow the ups and downs of Dubai to see where it all ends - or as it may be begins again.

Investment News, Investment opportunities, Middle East Business, Real Estate Investment Abu Dhabi, Credit Suisse, Dubai, Dubai real estate, Financial crisis, UAE

Year end is approaching fast and it is common to find analysts and experts trying to predict what will happen in the coming year. Not less so this year after what has been a very turbulent and difficult year with several large economies sliding into full blown Recession, the stock markets globally having lost in excess of a third of their value, some more, the property market having collapsed in major countries and several large commercial companies being threatened with bankruptcy and closure. Not to mention the financial sector which has seen some astounding collapses or bail outs in the last minute by governments.

One company, SAXO Bank who is a leading player in the Forex market, has made it a kind of tradition to come out with what they boldly call: “10 Outrageous Claims 2009″ which in their own analysts words is :

(A) thought provoking and controversial “Black Swan” exercise (that) always factors in the less likely scenarios as perceived by the market.

The primary reason for doing this “Black Swan” exercise every year is to counter-balance human psychology, which is usually skewed towards optimism. We tend to be somewhat more pessimistic in our Yearly Outlook than the average analyst in the market, and believe that it is important for the investor to always factor in the less likely scenarios (as perceived by the market). Please keep in mind that this is more of a thought exercise than a set of outright predictions – we do not consider the chances are better than 50-50 for all of these claims.

So what are the Danes’ predictions of doom and gloom then ? Well is has everything from Revolutions to Crude Oil falling belwo US$ 25 to the Euro falling below 1 US$ - here is a list of the 10 Outrageous Claims as summarized by Michael Haltman of Gather.com :

1. An Iranian Revolution
2. Crude dropping to $25 a barrel
3. The S&P 500 falling to 500 (880 now)
4. Italy dropping the Euro
5. Australian dollar slumping versus the Yen
6. The Euro falling below $1.00
7. Chinese GDP growth falling to 0% (current estimates range from 6-10%)
8. Eastern European Forex Pegs to Fail
9. Sharp declines in commodities prices
10. Yen could become the Asian currency peg over the dollar

MarketWatch quotes one of their team leaders from their Research & Strategy Division, David Karsbol, Chief Economist at Saxo Bank:

It is not even outrageous to call this the worst economic crisis ever. We have, regrettably, been rather precise in almost all predictions from last year. What used to be outrageous now seems to be the norm”, says Karsbol.

“In a year when markets and economies have fluctuated more widely than ever before nothing seems out of the ordinary or impossible. We believe that 2009 will be equally unpredictable and therefore have made ten outrageous predictions largely focusing and what might happen to global indices and currencies. The good thing is, overall, we predict 2009 will be a turning point because it can’t get much worse” says Karsb0l.

“In 2008 the S&P 500 has fallen well over 25% below its 1182 high of 2007, world oil prices got close to the predicted high of $175, and UK growth has turned negative. Who knows which of our 2009 forecasts will prove to be right but judging by previous years some of them most certainly will,” he adds.

     “When it comes to the future, there are three kinds of people: those who let it happen, those who make it happen, and those who wonder what happened.” (John M. Richardson, Jr)

“The best thing about the future is that it comes only one day at a time.” (Abraham Lincoln)

     “Stop acting as if life is a rehearsal. Live this day as if it were your last. The past is over and gone. The future is not guaranteed.” (Wayne Dyer)

My interest is in the future because I am going to spend the rest of my life there” (Charles F. Kettering)

He who laughs last laughs longest

 

Currency, Equity Investment, How it all works, Investment Banking, Investment Company, Investment Management, Investment News, Investment Services 2009 Forecast, Australian Dollar, Commodity prices, Crude Oil, Euro, Iran, SAXO Bank, Yen

With a very troubled 2008 soon behind us and many private as well as institutional investors breathing a short sigh of relief, the big question facing the world is of course: will 2009 be a year of recovery or will the crisis worsen and prolong the Recession or even, as some fear, slide further into a full blown Recession ?

This post looks into what some of the analysts have to say about 2009 and whether to world economies and all its dependants are in for a recovery or if indeed we shall have another very tough year to face up to.

MarketWatchpoints out that whilst the downturn is gathering pace in Europe and The US, the same crisis has now also spread in full to The Far East and Asia with the pace of the economic downturn in China being the most surprising factor to economists and experts.

Quoting experts on the development of the economic downturn in Asia, the article says:

Experts painted a grim picture for the Asian region in 2009.

“Asia is not doing well at all,” said Son Won Sohn, an economist at the Martin Smith School of Business at California State University, Channel Islands.

“Decoupling, which looked for a while like it was going to work — turned out to be a myth.”

Japan is mired in a recession, South Korea will be lucky to reach 2% growth this year and Chinese growth could fall below 6%.

The downturn in global trade has just begun to have a negative impact on China’s economy, but it is pressure that will last for most of 2009, according to Brad Setser, an expert on China at the Council of Foreign Relations in New York.

“The latest data for November was off-the-charts bad,” Setser said.

In addition, China’s own domestic cycle looks to have turned, he said.

“The pace of the downturn has been a little bit of a surprise,” he said.

Asian Investments, How it all works, Investment Management, Investment News, Investment opportunities, UK Investment, US Investments 2009 Recovery, China, Depression, Europe, Recession, US Economy

The US Dollar has had a turbulent year, first dropping to an all time low against the Euro in July only to surge to around the 1,20 level in October / November on the back of dropping equity markets, working as a safe haven for investors.

In recent days the Dollar has again dropped significantly in value against major currencies and especially the Yen & the Euro and the question is now what we can expect to see from the Dollar in 2009 with an ongoing credit crunch and crisis, wavering economies and lack on consumer demand in most sectors and countries ?

This post looks into some of the prevailing views on where the US Dollar is headed in 2009.

MarketWatch highlights the irony of the strong Dollar in the second half of 2008 which was based not on a strong US Economy but rather the fact that investors and governments alike fled into the Dollar as a safe haven and falling US interest rates too supported the increasing Dollar:

In 2008, the dollar did what most analysts expected it to do, but not for the reasons most had expected.

The U.S. economic recovery that many had predicted failed to materialize. Instead, the credit crunch morphed into a crisis, the slowdown turned into a full-blown recession, and U.S. interest rates went further down instead of up.

But the dollar still came roaring back to life in the second half, buoyed not by better U.S. fundamentals but by a mostly unexpected rush to safety.

The consequences of the dollar’s strength in the second half of 2008 will be seen throughout the first half of 2009. The prior strength of the dollar will eat into the profit margins of many U.S. companies that are doing business abroad,” said Kathy Lien, director of currency research at GFT in New York.

“This move is very well-justified and has a long way to run.” Standard Chartered is preparing to cut its dollar forecasts, Minikin said.

Currency, Investment News, Investment Securities, Investment opportunities, US Investments bonds, Currencies, Euro, US Dollar, US Treasury, Yen

SEC Chairman Christopher Cox

 

The Bernard Madoff investment fraud scandal is still evolving with Mr Madoff having been brought before a judge in NYC recently and lately with an open admission of guilt by the SEC Chairman Christopher Cox.

This post highlights his admission of lack of control and investigation and considers what the experts feel about the same.

In a MarketWatch article on the subject Mr Cox is quoted for saying :

In a statement Cox said an initial probe into how Madoff’s alleged fraud remained undetected revealed “multiple failures” by the regulator to thoroughly investigate the former Nasdaq chairman and his firm.

“The Commission has learned that credible and specific allegations regarding Mr Madoff’s financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action,” Cox said in the statement.

He’s revolted by what he found out, but it’s also in his interest to be revolted,” said James Cox, a securities law professor at Duke University in Durham, North Carolina who isn’t related to the SEC chairman. “He’s taken a lot of heat over SEC enforcement.”

Cox said he has ordered a full review to investigate the past allegations against Madoff and why they were not found to be credible. The probe, to be led by the regulator’s inspector general, will also look at all staff contact and relationships with the Madoff family and firm and whether they had any impact on decisions by SEC staff.

Equity Investment, Investment Banking, Investment Company, Investment Fund, Investment Management, Investment News, Investment Securities, Investment Services, US Investments Bernard Madoff, financial scam, Insider trading, The Securities and Exchange Commission (SEC)

Yesterday The Federal Reserve cut the main U.S. interest rate to as low as zero for the first time ever in an attempt to boost credit and try to end the financial crisis, causing the bond market to collapse and the stock markets to soar.

While this may be a blessing for those consumers looking to buy a house or a car, and hence a boost to the deflationary and slumping US economy, analysts are divided as to the long-term effect of this drastic move will have on consumer spending and the economy overall.

This post looks into some of the prevailing arguments surrounding the historic Fed cut.

MarketWatch quotes an economic team at Wells Fargo for being very optimistic about the cut:

This latest change in monetary policy strategy by the Fed has the potential to be highly effective in our view, and will better reduce the cost of borrowing for a vast majority of consumers and businesses,”

The same article also quotes Stephen Gallagher, Chief Economist of SocGen:

Bank confidence in its ability to finance itself today and in the future is an essential for making loans,”

Bloomberg quotes The Federal Open Market Committee for saying that:

“The focus of the committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level,” the FOMC said.

The Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Federal Open Market Committee said today in a statement in Washington. “Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

According to Wlliam Poole, former president of the St. Louis Fed:

The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding,”

Associated Press quotes  an impressed Mark Zandi who feels that The Fed is ahead of the game this time:

The Fed has taken some very historic steps and for the first time since this crisis began, they have gotten ahead of expectations instead of trailing behind them,” said Mark Zandi, chief economist at Moody’s Economy.com.

The article, however, suggests that the crisis is not over and may go on for some time due to the depth of same:

Economists cautioned that even with the Fed’s bold moves it will take months for the economy to stabilize given that it is confronting the worst financial crisis since the Great Depression and a year-long recession that is already the longest in a quarter century.

The news on the economy is expected to get worse before it gets better. Businesses, which have already cut nearly 2 million jobs since January, keep laying off workers in the face of slumping demand.

And AP’s article concludes that at least when it comes to the US Government’s inflationary fears things are on the up:

The weak economy is helping to keep a lid on prices. The government reported Tuesday that consumer prices fell by a record 1.7 percent in November as gasoline and other energy prices continued to plunge. The Fed noted that “inflation pressures have diminished appreciably,” a development that gives the central bank maneuvering room to focus on boosting growth.

Equity Investment, How it all works, Investment Fund, Investment Management, Investment News, Investment opportunities, US Investments bank lending, consumer spending, deflation, inflation, interest rate cut, liquidity, The Federal Reserve, US Dollar, US Economy

Apple

Analysts of tech stocks have been impressed with Apple’s performance during 2008 where they have outpaced their PC competitors with robust demand, even in times of financial turmoil and reduced consumer spending.

In November, however, Apple for the first time recorded a drop in sales compared to last year and also vis-a-vis the PC sales which actually rose and analysts are now worried that this could be the beginning of a bad run for Apple who seems determined not to enter the discounting game as their PC rivals have done.

This post looks into some of the experts’ opinion on whether this success company is in for a tough run or if indeed they shall, again, come up on top, outperforming the markets and their competitors.

The Wall Street Journal quotes David Bailey of Goldman Sachs:

Some analysts are worried that sales will slow after the holidays as consumers pull back. On Monday, Goldman Sachs analyst David Bailey cut his estimate for Apple’s 2009 profit, warning “some nicks have started to emerge.” Mr. Bailey warned the company faces “a tougher environment” in the first two quarters of next year, when he believes consumer demand will further deteriorate.

Experts are now worried that Apple’s so-far successful premium price policy will now backfire in times of reduced spending from consumers and see signs of trouble ahead if Apple does not adapt to their competitors’ strategy of aggressive pricing and bargains:

The November data indicate that falling prices for Windows-based PCs, and the rise of low-priced computers like netbooks — mini notebooks that cost as little as $300 — have finally tripped Apple, said Gene Munster, an analyst at Piper Jaffray, who still expects Apple to continue outpacing the market over the next year. “What you’re seeing in the numbers is price sensitivity with the consumer,” he said.

While Apple CEO Steve Jobs has been quoted saying “”we’re not tremendously worried the downturn will drive customers to cheaper PCs”, analysts of the tech sector remain concerned that with PC rivals having lowered their prices by as much as 35-45% on key products, compared to Apple’s modest 5-10% discount, Apple could lose out on sales in 2009 if they do not make some kind of comeback strategy or massive new product launch.

Other analysts point to the fact that recent surveys point to many US businesses voting in favour of adding Macs to their corporate portfolio of computers in 2009 and the trend is apparently increasing which promises well for Apple and its Mac sales in 2009 despite their premium price policy.

Computerworld quotes Laura DiDio, an analyst at Information Technology Intelligence Corp. (ITIC) :

In a just-published survey, 68% of some 700 companies polled said they will allow their end users to deploy Macs as their work systems in the next 12 months. That’s exactly double the percentage of businesses that answered the same question eight months ago, said Laura DiDio, an analyst at Information Technology Intelligence Corp. (ITIC).

“And Apple hasn’t done anything to actively promote this,” DiDio said. Instead, faced by users “begging to use a Mac,” IT managers are reacting to the “consumerization” of technology in the enterprise, she explained.

And she concludes that:

“After watching this for the last two years, I can say this is a steady, sustained trend,” said DiDio, of the overall trend of Macs moving into business. “I see no sign of it abating. I’m not going to proclaim that Macs are going to sweep Windows away in a tidal wave, but this is clearly Apple’s best showing in the enterprise in the last 20 years.”

Other experts again are pointing to the fact that Apple is no longer just in the business of making computers and notebooks due to the explosive rise of their iPod sales and not least their iPhone range which have taken the world markets by storm. Add to that what appears to be a solid rumour that Apple will tie up with none other than the retail giant Wal-Mart for sales and support in 2009 and you can easily argue a case of strength and promising future for the Cupertino based company.

MarketWatch’s Therese Poletti is one analyst to highlight this and with iPhone now comprising 39% of Apple’s turnover one has to seriously consider the non-compueter sales and products too when looking at Apple:

Apple is clearly looking to make the iPhone as mainstream as possible, much as it has done with the iPod, which is now the dominant digital music player in the U.S.

The iPod, which has an entry retail price of $49 for an iPod shuffle, now has a 71% stake of the $2.4 billion MP3 market, as of the end of September, according to NPD Group’s retail tracking service. The iPod can be found at Wal-Mart.

“Apple’s potential partnership with Wal-Mart likely indicates that Apple ultimately wants to drive mass-market adoption of the iPhone (like it has done with the iPod), rather than maintain a high-end positioning (as in the case of the Mac),” Sacconaghi wrote.

“Wal-Mart will have a greater impact on the iPhone’s demographic reach in terms of raising awareness and availability among lower-end consumers who are less likely to shop at the Apple Stores or Best Buy.”

So for those waiting for an even lower-priced iPhone, it may not happen this year, even if the iPhone is sold at Wal-Mart. But Shaw Wu of Kaufman Brothers Equity Research believes the $99 price point is inevitable at some point, as Apple “rounds out its cell phone product line.”

So yes, some of the exclusiveness of the first iPhones will inevitably be lost in the process as the price falls, but isn’t that true with all hot new electronics products, thanks to the constant evolution of ever-shrinking semiconductors and storage at the heart of most consumer electronics devices?

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