Home prices are recovering

According to this mini article by CNN, prices in several major housing markets have seemingly recovered.
Home prices are hitting new highs in these reported cities: Dallas, Houston, Denver, Pittsburgh, San Antonio, San Jose, California and Austin, Texas. While home values nationwide are still down 13.5% from their pre-housing bust peaks, according to the article, there are significant progresses made in the aforementioned cities.
The article is divided into 7 slides, each compares home value now and during the housing boom peak. The slides also mention shortly about the major driving factors of house cost in each individual city.
For example:
In Austin, Texas, the home value now is at $221,300 while at the boom peak it was at $192,600.
The biggest driver is said to be Tech jobs, which explain the high-paying median salary which attributes to rising house price.

Is this a positive sign of the recovery of the economy?
Feel free to leave your comments below and check out the short and sweet article at House Price Rising 

Democracy No More

A new study conducted by Princeton University and Northwestern University shows that America is less a democracy and more an oligarchy. The power of money was shown to be more powerful than the voice of the general voter, due to the influence of corporate lobbying and the power of the wealthy. The study researched 1779 policy issues in the period between 1981 and 2002.

Statistics include the fact that when 80% of the public demanded a particular change, they only got what they wanted around 43% of the time. One of the researchers said that the data points to the fact that "mass-based interest groups as a whole do not reliably side with the wishes of the average citizen.” An oligarchy was defined as “rule by a small number of wealthy people.” The researchers warned against completely characterizing the country as an oligarchy but did say that it is moving towards that end.

http://america.aljazeera.com/articles/2014/4/16/oligarchy-politicsus.html

Eurozone Banking Regulations Fall Short

With the Eurozone's unemployment rate down to around 10.6% after being rattled by the crisis in Greece and Spain just several years ago, the European parliament is putting finishing touches on a banking union designed to avert another crisis from happening. They want to create a common currency and central authority so that member nations can share the risks and responsibilities. However the resolutions put together seem to fall short of making any real difference. For instance, they've put together a Single Resolution Fund worth 76 Billion Euro to recapitalize banks in an emergency. This may seem like a lot of money, but not when put into context. Some of the single largest banks in Europe have assets exceeding 1 Trillion Euro. In addition, the banking union was supposed to guarantee deposits to prevent runs on banks such as the ones that happened in Greece in Spain. However, individual countries already have their own deposit insurance policies. This means that a euro could potentially be valued differently in two separate countries in Europe which is exactly what the parliament doesn't want. The new banking union regulations fall very short of making significant and meaningful changes to the Eurozone's banking sector and should another crisis arise, they would be unprepared yet again.

http://www.businessweek.com/articles/2014-04-24/europes-deeply-flawed-banking-union

The spectre haunting San Francisco

http://www.economist.com/blogs/freeexchange/2014/04/housing-markets


This article is talking about the how housing markets are struggling.  For rent to be considered affordable the rent shouldn't take up more then 30% of a households income.  This goal is more unattainable then ever for middle class families and the market is just pushing the rent prices up faster then the raises in pay.

The strain of high cost rent is no longer just limited to the big cities such as New York.  This is sweeping across the United States as the housing market tries to recover.  It also points out that most of the construction being done is for luxury housing rather then middle class homes.  

Investment Banks on the Downhill Trend
http://www.economist.com/news/finance-and-economics/21600992-engine-investment-banking-spluttering-ficc-and-thin

The business of investment banking has quickly taken a dive compared to what it once was. In 2009 according to the article, world investment banks earned around $142 billion. In 2013 banks brought in revenues of about half that at $74 billion. What once was a money making market has quickly fallen by almost 20% in revenues since 2009. JPMorgan Chase, an important and the worlds largest investment bank, has decreased in profits of about 21% in 2014. Citigroup, an also well known investment bank had a 18% decline in profits.

Does this mean the future for investment banks will continue to grow smaller as time progresses or is this just a cyclical effect ? According to many expert the beginning months of the year are usually the most profitable. This has not been the case in the year 2014 and worries will continue to grow as banks announce continually declining profit margins. Every bank across the globe is now required to hold more capital so it meets equilibrium with trading. This downward trend in investment banking is also causing a negative impact on the entire global economy. European investment banks are on an even more harsh decline, giving approximately five points in market share to United States investment banks in FICC plus an estimated three points this year.

Americans still don't trust the stock market

http://money.cnn.com/2014/04/21/investing/stocks-investor-survey/index.html?iid=HP_Highlight

          Investing in stock market is the best way to become wealthy because of the high return. But apparently American people still trust house market more. It has been more than five years after the financial crisis in 2009, most of American people still believe stock market is risky, with the result that 73% people are not intend to invest in stock. Although the S&P 500 has more than doubled in value after bottoming in 2009.

         But the experts said Investing in diverse portfolio is the best way to grow wealth over a long period of time considering the inflation. The experts suggested that inflation will undermine the value of fixed income assets like bonds.

Job Market for College Graduates Improves Slightly

The government has announced that the economy has been improving in the last several months resulting in more jobs opportunity for college graduate. Although job markets has improved, they are still challenges in finding jobs for those recently graduating from college. Many of the graduates are accepting jobs outside of their field and accepting less paying jobs. According to the article, “ The Labor Department said on Tuesday that the unemployment rate for 2013 college graduate-- defined as those ages 20-29 who earned a four-year or advanced degree-- was 10.9 percent. This was lowest from 13.3 percent in 2012 and has been the lowest since 2007 when it was 7.7 percent. The drop indicated economic growth and more people being hired.

http://www.nytimes.com/2014/04/23/business/economy/job-market-for-college-graduates-improves-slightly.html?_r=0

Japan's trade deficit quadruples in March

http://www.bbc.com/news/business-27099942

Japan's trade deficit has grown even more due to less export growth and higher import of energy sources.
The deficit rose from 356.9 billion yen to 1.45 trillion yen during the same month a year ago.
This dramatic increase in the deficit is also due to Japan's recent monetary policy. Japan has implemented a series of aggressive policies to increase economic growth which has led to a large increase in the country's money supply. This large increase in money supply has caused downward pressure on the yen, weakening the yen sharply. The Japanese currency fell nearly 10% against the dollar between March last year and March this year. Since Japan has increased energy, oil imports, their weak yen has pushed up the price of imports (since with a weaker yen, they can purchase less of what they could originally before with the same amount of yen), thus also contributing to the trade deficit as they are needing to import more. 

China's 2014 Q1 GDP Provides Good & Bad Signs

China's 1st quarter GDP grew at a non-expected 7.4%, and it is expected to grow even more. Despite this, growth was slowed from 7.7% in Q4 2012 to 7.4% Q1 2014, the lowest for China since Q2 2012. This appears to be consistent with Premier Li Keqiang's policy goals for China in the future. His long-term goals for China include adjusting the economic growth model from an investment-driven economy to a consumption-driven one.

In the 1st quarter, consumption accounted for 76.7% of China's GDP growth, the 2nd most since the data series began in 2009. In addition, year-to-date retail sales increased from 11.8% (January-February) to 12% year-over-year. Investment growth decreased from 17.9% to 17.6%, which was consistent with China's goals. Industrial production also increased from 8.6% to 8.8%.

In terms of bad news, however, is that values of homes in the 1st quarter fell 7.7%. New property constructions fell 25.2%, the lowest quarterly amount since Q1 2009. The broadest measures of finance for the economy fell 9.1%, including a 66% decrease in trust loans.

With prices declining, deflation occurs, and deflation is worse for an economy than inflation, as we have discussed in class, due to lower revenues and profit margins, which lead to more turnover, less hiring, stagnant wages, and pay cuts, as well as lower consumer disposable income and lowered price expectations.

The article provides positives and negatives of these economic policy changes for China. What do you think about it? http://www.forbes.com/sites/oliverbarron/2014/04/21/does-chinas-q1-gdp-figure-rule-out-a-hard-landing/

Export Restrictions on Rare Earth Metals

http://www.nytimes.com/2014/03/27/business/international/china-export-quotas-on-rare-earths-violate-law-wto-panel-says.html?_r=0


In 2010, China cut their export quota of rare earth metals, of which China is a leading world supplier. By cutting their exports by 40%, nearly 30,000 tons, the world prices for rare earth metals from China artificially rose and caused shortages of the minerals. The US, and eventually the EU, brought this to the WTO saying that since non-Chinese buyers were paying around twice as much as a Chinese buyer was, China was manipulating policy at the expense of international buyers in order to further their own home business' prosperity. The WTO ruled against China in this, stating that the Chinese's reasoning for the sanctions did not comply with WTO's rules.

Older Americans Are Buying Smartphones

Consumer demographics for smart phones are changing, as older people are increasingly becoming interested in purchasing smart phones.  According to a Nielsen survey, 51% of American adults who are 55 or older have purchased a smart phone.  Since 2013, this statistic has increased by 10%.  As of now, this is the first time in which a majority exists in each age group for having bought a smart phone.  Right now, 70% of Americans have bought a smart phone, with 85% of them looking for a new phone currently.  Apple is the biggest maker of smart phones, with 42% of people who own a smartphone saying they prefer Apple goods.  However, Google Android operating system is the most used system for smartphones.

The American Middle Class Is No Longer the World's Richest

Link to article

For many years the American middle class has been the richest in the world, but as of lately, this has changed. This is due to the expanding gap between the wealthiest and poorest Americans. The richest Americans are becoming richer than the very wealthy of other nations, but this isn't necessarily good for our economy as a whole. The United States' income distribution is very skewed. Being a middle-class citizen is becoming harder, and it is becoming especially difficult to get by being poor in the US.

The future of finance: Leviathan of last resort

Ever since the Lehman Brothers went bankrupt in 2008, many people assumed that the housing market crisis occurred because the state surrendered its control of finance to the market. A source of dodgy and high risk loans is the actual cause as to why the Lehman Brothers firm went bankrupt. Due to the consequences of the 2007-2008 housing market crisis, plans are set afoot to set up a permanent public backstop to the mortgage market. The government would insure 90% of loses if there were to be another crisis. Although this may sound like a good idea, there are two issues. The first is that it is hard to see how entrenching state support will prevent excessive risk taking. The second issue is that the 07-08 housing crisis did not occur because of a lack of government intervention. The housing market is far from a free market, as it is one of the most regulated industries in the world.

Back in 1856, economic journalist Walter Bagehot blamed market crashes on what he called "blind capital". These were periods when people were credulous with their cash, they ignored risks and flooded unwise investments. As a result of previous market crashes the government had to devise some special rules and regulations to make finance safer. Bagehot invented one rule, that being the need for central banks to rescue other banks during crises. A sort of toughness rested on the view that governments should treat financiers like any other industry, thus forcing bankers and investors to take as much risk as possible for themselves. The more the state protected to the system, the more likely that people would take risk without feeling they are liable.

That exact danger was bounteously illustrated in 2007-2008. Having pocketed gains from state underwritten risk-taking during the boom years, bankers presented a bill to tax payers when the market bubble popped. Since 2008, there have been a mass of new rules, ranging from America's unwieldy Dodd-Frank law to other transaction taxes in Europe. Some steps have been taken to boost banks capital and liquidity in attempt to make finance more self reliant. Also, banks in America now face a tough new leverage ratio. However, many people still believe that the urge to regulate and protect leaves an industry to depends too much on state support.

http://www.economist.com/news/leaders/21600699-state-subsidies-and-guarantees-are-once-again-corroding-financial-sector-and-creating-new           

Netflix Increasing Prices

http://money.cnn.com/2014/04/21/technology/netflix-prices/index.html?iid=s_mpm

At $7.99 a month currently, Netflix's subscription price will be raised a few dollars within the next few months. CEO Reed Hastings has stated that if the company is to continue adding better content and more original content, the price increase will be absolutely necessary. In just the first three months of the year, 2.25 million people subscribed, increasing the domestic total to about 36 million. Netflix, while providing hundreds of shows and movies, has more recently found success with original programming such as House of Cards and Hemlock Grove. Made available at your fingertips, I personally would strongly suggest and promote subscribing to Netflix. It is essential for any college student. The increase in price will likely not affect the number of people already subscribed to Netflix, and will cause a relatively minor increase in revenue for the company.

Creative new, or not so new business

http://money.cnn.com/2014/04/17/smallbusiness/laundromat-cafe/index.html?iid=A_SB_News

Laundry bars originated in the 80's and apparently are making a come back, but in a classier format.  The originals were plastic seats and cheep beer, but this article describes a coffee house/brewery/gourmet sandwich shop with all wood seating that also does your laundry.  It is a creative new industry and although it is a rather narrow market, when located wisely, it seems to be a lucrative new small business.

Americans have fallen in love with real estate once again

http://finance.fortune.cnn.com/2014/04/18/real-estate-investment/?iid=HP_River

According to a Gallup poll released Thursday, a plurality of Americans now think of real estate as the "best" long-term investment, followed by gold, stocks and mutual funds, savings accounts/CDs, and bonds. For wealthy Americans, investing in stock market is the best way to become wealthy because of the high return. As to upper-income Americans, they are much more likely to say real estate and stocks are the best investment. But Americans don't refer "best" to highest return. Actually, real estate, returns very little when adjusted for inflation.The house price has appreciated little since 1987, after adjusted for inflation. 

"Monetary policy can't sace long-term unemployed: Ecconomist"

According to chief economist for Sterne Agee the job market it is not looking healthy. Some top economist, like John Ryding chief economist for EDQ Economics, are skeptical whether or not a monetary policy can increase hiring. These economist believe the skill gap of employees is a contributor to the disconnect between hiring rates and the large number of long-term unemployed. Majority of small businesses with job offerings are recognizing applicants applying for the job do not have the proper skill set to take the job. Other economist are recommending tax job outsourcing along with other policies. This will allow good paying manufacturing jobs to the unemployed which will get them off of food stamps.

"Monetary policy can't save long-term unemployed: Ecconomist"

The empire crumbling

http://www.economist.com/news/business-books-quarterly/21600662-struggle-keep-magic-ghost-glory-past


People have always concerned of Apple's future after the demise of Steve Jobs, who had brought an innovation and great success to the company as a CEO. They are declining slowly, just because of the death of the "greatest" CEO who reigned and brought the rain. They did not even have the time to prove they can still prevail without Jobs, but with great, new ideas. In addition to that, the competition with Samsung, Google, etc. are still a threat since they are advancing rapidly in various technologies. Apple also had to face the revelation of the terrible working conditions in parts of Asia, where they have factories (or factories of companies that supply equipments to Apple). It is still not sure that Apple can actually regain its glory like before and the predictions of their future are rather grim.