Saturday, 28 September 2013

Ireland's Economic Comeback

On Wednesday, the International Monetary Fund (IMF) released a billion dollars of financial help to Ireland, as the country complied with the requirements set up in its 2010 bailout plan. The plan, which saved Ireland from bankruptcy after it suffered a massive banking crisis starting 2008, is reaching its end, as Ireland is getting ready to start issuing sovereign debt again in December. However, the country has to reach a minimum annual growth of 2% for its debt to become sustainable.

Ireland is now out of its second recession in five years with a 0.4% second quarter expansion. This positive data, however, falls short of the optimistic 1.3% growth over the entire year predicted by the Irish government. Irish exports have grown by 4.3% over the same period, while household consumption grew by 0.7%.

The IMF decision came almost one week after other good news for Ireland: on Friday, September 20, Moody's announced positive forecasts on Ireland's sovereign debt, which it now judges as "stable" instead of "negative", and now considers that the country's debt-ratio should become sustainable again. These forecasts, however, highly depend on Ireland's ability to maintain its austere economic policies and exportation rates. Before this announcement was made, Moody's was the only rating agency left to consider Ireland's debt as a speculative and unstable investment, as S&P and Fitch had positive and stable perspectives on Ireland's ratings. The change in the agencies' opinions seems to indicate that Ireland is now considered as financially sound, which should greatly impact the rate at which it will issue its new December bonds.

Ireland is reaching the end of its bailout program and seems to have found the path to economic stability. As such, it is a concrete example of what could happen to other bailed out European countries like Greece and Cyprus in the future. Moreover, this new Irish growth will have a positive impact on its partner economies in the European Union, which could in turn help other bailed-out countries.

- Mickael R'bibo

Friday, 27 September 2013

Telangana: To be or not to be?

Telangana supporters gather to advocate for the region's statehood.

The concept of statehood has always been a contentious debate in India. It’s recently gotten international press as Telangana, a region of Andhra Pradesh, is fighting a stormy battle for statehood.

When India gained independence from the British in 1947, the modern-day Indian map began to emerge. States were created and borders were drawn. The map continued to take shape in 1956 with the States Reorganization Act, a piece of legislation resulting in the single largest change in state borders since India’s independence. The act called for state boundaries based on linguistic differences.  So, Karnataka was created for Kannada speakers, Kerala was created for Malayalam speakers, Gujarat for Gujarati speakers, and so on. Modern day Andhra Pradesh was created for Telugu speakers. 

It seems despite their linguistic alignment with the other regions of Andhra Pradesh, the people of Telangana were unhappy from the start. Movements for their secession have been arising for decades, with major uprisings occurring in 1969, 1972 and 2009. Over the past few months the Telangana movement has gained new momentum, and despite strong opposition from Andhra Pradesh, it seems now that it will indeed become a state.
Telangana protests over the last few months have clashed with police.

Telangana is the largest of Andhra Pradesh’s three regions, covering 40% of its total area, holding 40% of its population, and making 76% of its revenues. The state capital, Hyderabad, lies at its core. Hyderabad is one of India’s most important cities from an economic standpoint.  As the statehood plan stands now, Hyderabad will serve as the capital of both Andhra Pradesh and Telangana for the next ten years.

If Telangana does become a state, it will be the first state in India created due to dissatisfaction with the political community. The people of Telangana feel they have been suffering from political neglect in the state and in the nation.  They feel their representation in the national government over the last 50 years has been unfair, as most of the state’s chief ministers (equivalent to a state governor in the US) have come from other regions. Chief ministers from Telangana have served for 10.5 years, while chief ministers from the rest of Andhra Pradesh have served for more than 40 years. As a result the people of the region feel ignored and exploited by the national government. They feel they are on the state’s peripheral agenda, leaving Telangana a backward region. Some of the injustices they decry include poor water distribution, budget allocations, and government job allotments.  Water distribution in particular, is a major concern for the people of Telangana. Not only have there been issues with receiving a reliable supply of clean drinking water, but also there have been issues with receiving water for irrigation. A dependable irrigation system is crucial to the livelihood of the Telangana people, as agriculture is one of the region’s main sources of revenue. Also, due to a recently constructed dam, some mineral rich sections of Telangana are not receiving an adequate water supply to sustain their mining communities. The dam has redirected the river’s water to other regions of the state, away from Telangana. In addition to the water injustices, the Telangana people feel that despite the revenues they contribute to the state, they are not seeing sufficient returns in terms of government development projects and government jobs.

Critics have called the recent national attention to the issue nothing more than a “short-term electoral maneuver.” The Indian national elections will take place in May of 2014, and as candidates are being selected it is no secret that they are seeking votes in the region. Congress, the current leading national party, says Telangana will be created before the next election.

The fight for the state of Telangana brings to light many issues. If the federal government grants Telangana statehood this may lead to other marginalized communities vying for statehood too. The people who live along the slender neck of West Bengal, in the region of Darjeeling, have been struggling for a state called Gorkhaland for decades. Like the people of Telangana, these people too feel ignored by their state’s government.  Will they too receive the status of statehood? Why Telangana instead of Gorkhaland? This will become a particularly controversial issue, when the national election passes and the typical insouciance of the national government returns. Other issues will arise beyond the dissatisfaction of other marginalized Indian communities. How will Telangana continue to share its state capital with Andhra Pradesh? What happens when their ten-year agreement expires? What are the other repercussions in store for Andhra Pradesh after the split is made? Is Telangana prepared for the administrative responsibilities that are required to run a state? Many questions still need to be answered on both India’s and Telangana’s preparedness for the new state. It is not something to be rushed, simply to meet the deadline set by the national election.

Written by: Lynn Bernabei

Beats Takes the Next Big Step

Top private equity firm, Carlyle Group, gave Beats Electronics $500 million Friday valuing the company at $1 billion. In exchange for growth capital, it will be taking two of six positions on the high end sounds and audio tech company's board.

The money will be used to buy back HTC's final twenty five percent stake in the company, ending a partnership that did not go quite as planned. The Taiwanese smart phone company bought half of Beats three years ago for $309 million dollars, and used the technology in its smart phones. As its cell phone sales have since far lagged behind Samsung, it has moved to sell its holdings in its partner, in order to focus on its most important business segment.

Beats has started to expand into the speaker business, revealing a new line of pill speakers marketed in notable pop songs "Blurred Lines" by Robin Thicke and "We Can't Stop" by Miley Cyrus. It has already captured sixty four percent of the premium headphone market, and has put its technology into Hewlett-Packard's computers. On track to made $1.2 billion in revenue this year, the infusion of capital will allow the company to take the next step in separating itself from its competitors.

Beats is banking on the continued growth of social media use and the smart phone industry. As it looks to become the innovative leader of audio accessories, it believes that the growth in tablet and digital audio use will allow its own growth to continue.

The Caryle Group's investment shows the trust it has in the financial strength, brand, and growth prospects of Beats Electronics. The next wave of Beats premium headphones should hit the market with a splash.

Rishi Chheda

Thursday, 26 September 2013

Shanghai Free-Trade Zone Entices Foreigners, Raises Land Prices

China's official news agency, Xinhua, reported on Tuesday that Shanghai would open up its planned Free-Trade Zone on September 29. The roughly 29 square kilometer area in Shanghai will be exempt from trade barriers and censorship rules that affect all parts of China outside of its Special Economic Zones. The ridding of mandated customs inspections of all imports and exports aims to boost trade volume and attract foreign investment in China's most populous city.

The most attention-grabbing quality of the new Free-Trade Zone is the lifting of internet censorship bans on Facebook, Twitter, and The New York Times, allowing unrestricted access to these sites only within the small zone in the city. The new policy aims to attract foreign firms to spur local banking, insurance, shipping, and healthcare industries, among others. “In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home,” stated an anonymous Chinese government official.

One consequence of this announcement is a surge in home prices around the Free-Trade Zone. Real estate prices in Gaoqiao, a residential area near the new zone, jumped as sales soared 50% in just two weeks at the beginning of September. Since the original plans for the Free-Trade Zone were announced earlier in the year, real estate prices had already risen roughly 8% in the area.

Shanghai’s move to attract foreign firms is seen as a modern application of Deng Xiaoping’s principle of “Reforming and Opening Up” which showed much success in cities like Shenzhen. The entry of foreign firm into Shanghai’s local market will spur competition and innovation in the 19 industries the zone plans to deregulate, and it will lay essential groundwork for further deregulation of trade and free exchange of the Yuan in China.

-Mitch Lagrasta

Netflix Expanding

Netflix recently announced a second deal with a cable company to bring its online streaming service to cable. The deal with Swedish company Com Hem would add a potential 600,000 customers to its service. This comes after Virgin Media struck a similar deal in the U.K to bring Netflix to at least 1.7 million of its customers.

The two cable providers would begin offering the service to subscribers of their respective TiVo DVR services.

While this deal may seem like big news for the two companies, Netflix and Com Hem's DVR service must have a balance to properly coexist. This is because any DVR system can undercut the streaming service provided by Netflix or vice versa. For example, if I wanted to watch an episode of Law and Order SVU, I could potentially look it up on Netflix or just have TiVo record all SVU broadcasts onto the DVR hard-drive. The TiVo service that Com Hem provides can be anywhere from twice as expensive to seven times as expensive as Netflix, and with Netflix right on the system consumers may start to think: is this service really worth it when I can just keep Netflix by itself?

Although there is a possibility of either service poaching customers from the other, both sides of the deal have inherent strengths. Com Hem's DVR service will allow viewers to stay up to date with current shows that Netflix won't have for several months. On the flip-side, Netflix has exclusive content, such as House of Cards, that consumers have interest in but may not have access to. Overall, this Netflix deal with Com Hem may just be a start to the streaming company's plans of expansion. Consider this a test run before any U.S cable providers are approached.

-Aureen Sarker (Photo Credit: Netflix)

Tuesday, 24 September 2013

Obama pushes for diplomacy on Iran's nuclear program

President Obama and Iranian President Hassan Rouhani both openly stated their support for a new diplomatic effort regarding Iran's nuclear program. Obama, addressing the UN General Assembly on Tuesday, stated that there was "basis for a meaningful agreement." In recent weeks, Rouhani, who was elected in June, has suggested that he is open to developing a program in which Iran is allowed to further their nuclear energy program but prevents them from building a weapon, claiming that a nuclear weapon program would "contradict our fundamental religious and ethical convictions."

Obama said that Secretary of State John Kerry was working with the Iranian government to resolve the negotiations about Iran's nuclear program. In his statement to the UN General Assembly, he stated that success in the negotiations would be a "major step in a long road to a difficult relationship, one based on mutual interests and mutual respect," adding that "the roadblocks may prove too great but I firmly believe the diplomatic path must be tested."

Obama has suggested in the past that if Iran were to develop nuclear weapons, the United States would not be afraid to take military action against Iran. Rouhani spoke with fervor about several components of American policy as well, stating his frustration with previous sanctions on the Iranian economy and the use of drones to kill alleged terrorists.

Nonetheless, the push for diplomacy on the issue marks significant progress for both the US and Iran. Speculation has begun that Obama and Rouhani will be able to the resolve the issue quicker than expected, despite the tense relationship between the two countries. The resolution to this issue would be a major step in the direction of diffusing the tension and repairing the relationship.

-Abhishek Parekh

Monday, 23 September 2013

Bye-Bye Blackberry

Blackberry, Blackberry, Blackberry. It looks like it's time for you to take a giant step away from the highly competitive smartphone market. Anyone remember when these things were the cool phone to have? That lasted all of 6 months.

4 or 5 years ago when smartphones were in their early beginnings and people had to deal with the horrible data plans that offered sub-3G speeds, Blackberrys were a viable option. So viable that the market loved their stock, and it enjoyed levels above $70/share. In 2011, it had a pretty solid run too since companies worldwide adopted the Blackberry as a cheap and efficient work phone for employees. But now with the Samsung Galaxy S4 and Iphone 5, 5s, and 5c dominating the market, there's no room for the tiny screen and tiny keys that Blackberry offers. Their new smartphones haven't been cutting it. Blackberry failed to penetrate the consumer market, and that's the market where the money lies.

Just today, Blackberry was finally acquired by another company, Fairfax Financial Holdings. Blackberry received about $4.7 billion dollars, valuing them at around $9 per share. If Blackberry really thinks that now they are only worth 9 dollars a share, maybe Fairfax is making a mistake in acquiring them. Unless Fairfax completely changes Blackberry and starts producing smart"er"phones, it's near impossible to find a possible strategy that will work in the long run. Another major challenge for Blackberry is their lack of an App Store. Apps have improved everyday life and are a major key to creating a great phone. Since large amounts of people have already switched to Androids and Iphones, it will be hard to find developers to create apps for the Blackberry market.

In my opinion, it's time to say good-bye to our dear friend. Maybe offices worldwide can keep Blackberry afloat as a small company, but as consumers, there seems to be little that Blackberry can offer us.

-- Kunal Agrawal

Sunday, 22 September 2013

Money Mayweather Cashes In

The highly anticipated fight between Floyd Mayweather Jr. and Saul “Canelo” Alvarez took place last weekend at the MGM Grand Hotel and Casino in Las Vegas, Nevada.  Showtime Networks announced this past Thursday that the mega-fight generated over $150 million in pay-per-view revenue with 2.2 million purchases which broke the previous record also held by Mayweather for his $136 million fight with Oscar De La Hoya in 2007.

Mayweather himself received a guaranteed payout of $41.5 million for the fight, but the money trail does not end there.  Estimates suggest he may very well earn over $80 million for the fight because he also receives reimbursements for each PPV sale that somebody buys.  While he is recuperating from his dominating win over Canelo last weekend, Mayweather is taking off some time to relax on vacation before his next fight in May.  The opponent is still to be determined.

Some critics have suggested boxing is a dying sport.  But big payout days like these suggest that boxing is a sport still highly demanded by consumers.  Mayweather is one who attributes his success to boxing as he recently flaunted a receipt from his one bank account in an interview with ESPN – showing that he had over $123 million in cash.  Whatever the case, Mayweather is poised to make even more money as he has already signed a 6-fight contract with Showtime which estimates suggest he may grow his net worth another $250 million.  Boxing certainly has treated Mayweather well and is here to stay as long as he and other big names are still around.  

-Anxhelo Dhimitri

Saturday, 21 September 2013

The Apple Response: Two Phones and a New Platform

              Yesterday hundreds of Apple stores opened their doors to eager customers eager to get their hands on the newest iteration of the iPhone. However for the first time Apple was launching not one, but two new iterations of the iPhone. Labeled the iPhone 5c and 5s, this newest iPhone lineup represents a departure from Apple’s typical one-phone strategy. In the wake of increasing competition from Android-powered smartphone providers, most notably Samsung, and decreasing market share, Apple has been hard-pressed to find way to reestablish itself as the dominant player in the smartphone space. In addition to the release of the “budget model” 5c and “mainline” 5s, the company has also majorly overhauled its operating system. The straightforwardly-named iOS 7 was designed to address the concerns of many Apple users that the iPhone was functioning on an outmoded platform.
              Yet although Apple’s recent bid to reassert itself it the smartphone has been aggressive, Apple may not have been aggressive enough. Apple share price has been reeling since the announcement of the 5c’s price which many analysts believe to still price Apple well out of many consumers’ reach. Reports that iPhone 5c preorders undershot expectations have not been helping either. Moreover Apple’s iOS 7 has been met with some mixed reviews. Moreover complaints that Apple has still not shifted towards larger-screen models has prevented some consumers from upgrading or switching from the Android platform.
Nonetheless, Apple’s latest product release represents a significant shift in Apple’s corporate strategy. Apple is becoming increasingly responsive to competitors and consumers alike. Ultimately, although Apple’s shift indicates a promising return to form for Apple, it begs the question— has Apple become too much like its one-time archrival Microsoft. Has Apple been too successful for too long?

- Joseph Ting


About this, about that

Wednesday, 18 September 2013

Grand Theft Auto V: The Right Way to Usher in a New Era of Gaming?

Grand Theft Auto V, more commonly known as GTA V, is unquestionably one of the greatest games of the year. Though it was only released yesterday, the game is already breaking records. In its first day alone, it had over $800 million dollars in sales. This number easily beats the previous record of Call of Duty: Black Ops 2 which had around $500 million in first day sales. The movie could continue breaking records as it is not only a commercial success, but also has gotten great reviews, with a 98 on metacratic for the Xbox version. The fact is though, that a new generation of consoles is about to emerge, with the release of the Xbox One and the PS4, and GTA V will be one of the last blockbusters on the current generation (though versions of the game will be available for the new consoles). This game cost $266 million to produce and came a few years after GTA IV.

The problem I see going forward with the industry is that on the heels of the massive success of GTA V, companies will spend a greater percentage of their resources attempting to create huge game franchises while losing focus on one off games that do not have as high a ceiling, but promote long term revenue and help fund the potential blockbusters. Creating more high budget games like GTA V can be great for companies that experience success, but if the games flop, they can cripple the companies as well. The gaming industry is already struggling because of the multitude of options provided by other sources like online games or cheap, easy smartphone apps as opposed to the $60 console games. I believe that if the industry follows Rockstar Games' example and goes for more high budget, high risk games, the already hard pressed industry, along with console gaming itself could soon become a thing of the past.

-Varun Sawhney

Sunday, 15 September 2013

Race: Chairman of The Federal Reserve

Earlier today, Lawrence Summers, a contender and front runner in the race to become the next Chairman of the Federal Reserve, withdrew from the race, leaving Janet Yellen as the new prospect. Mr. Summers is a close economic advisor to President Obama and former Treasury secretary.  This news adds to the unusual interest and coverage of this election, which first gained its popularity when speculation that Ben Bernanke, the current chairman of the Federal Reserve, would no longer serve as the chairman. Other candidates in the running include Timothy Geithner, who has not officially entered the race but is being heavily pressured by the media to enter, and Christina Romer, a former Chair of the Council of Economic Advisers. Ultimately, all these candidates have similar stance on ways to approach the economy but differ in their intensity of action. For instance, Janet Yellen, the current vice chairman of the Fed, is in favor of printing money. She has a tendency to approach every economical problem with printing more money, which could eventually lead to hyperinflation. Meanwhile, Mr. Geithner is best known for the “Geithner Plan” in which he proposed to lower borrowing costs, fill the gap in demand with a stimulus package, and find a way to help banks lend money again. Again, this is similar to Ben Bernanke’s course of action except that lowered borrowing rates were translated into zero borrowing rates. Therefore, I believe the course of the economy in the next four years doesn’t seem to be too different from the current path.

Furthermore, the actions by the Federal Reserve in hopes of recovering the weakened economy, specifically the quantitative easing policies and the zero interest rates, sparked great debate between the two political parties. Democrats were more in favor of the easy money policies, concluding that spending will help the economy improve. Republicans, of course took the opposite stand. Another interesting thing to note is the way the chairman is elected. It is quite an extended process that relies heavily on political preferences. First, the President appoints seven members of the Board of Governors, who must serve for 14 years. Then, the president chooses the chairman and vice-chairman from the Board of Governors, who then must get approval from the Senate. The long process radiates the necessity to choose wisely and think about not only about the long term interests of the economy but also about what course of action in the next 4 years will yield the greatest return. Hopefully whoever becomes the next chairman of the Federal Reserve can bring the economy back to where it was and preferably better.

-Subeg Singh