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Tesla Becomes Most Valuable U.S. Car Maker

April 12, 2017


Elon Musk’s Tesla Inc. is now officially the most valuable U.S. Car maker today. It edged out General Motors by having the largest market capitalization. Early Monday, Tesla reached a record stock price high of $312.39, creating a market value of $50.887 billion. This value exceeds GM’s market value around $1 million.

However, compared to Japan’s Toyota Motor Corp market capitalization of $173 billion, Tesla has a long way to go.

Throughout March 2017, Tesla’s stock surged by 35% as investors remain optimistic that Tesla will lead the revolution in the energy and automobile markets.

Tesla is based in Palo, Alto, California and will release its much-anticipated Model 3 sedan in the second half of this year. It is aiming to produce 500,000 annually starting next year.

Michelle Krebs, an auto analyst at Autotrader.com, said, “The real test for Tesla comes when it launches the Model 3, the high-volume, mainstream-priced electric vehicle that is supposed to help the company achieve profitability.”

The Model 3 will be sold at around $35,000 and will compete with Ford’s all-electric focus and GM’s Chevrolet all-electric Bolt. Ivan Feinseth, chief investment officer of Tigress Financial Partners, said, “The car is a high-performance, luxury car that happens to have an electric engine. It competes with BMW, Mercedes, and Lexus.”

In 2016, Tesla sold 76,230 vehicles while Ford sold 6.7 million and GM sold 10 million cars.

Alexander Potter, analyst at Piper Jaffray, said in a report, “Tesla isn’t just another company. More so than any stock we’ve covered, Tesla engenders optimism, freedom, defiance, and a host of other emotions that, in our view, other companies cannot replicate.”

Jeffrey Gundlach, a fund manager, overseeing over $105 billion in assets at DoubleLine Capital, said, “As a car company alone, Tesla is crazy high valuation. As a battery company- one that expands and innovates substantially- maybe the valuation can work.”

Some analysts are skeptical. Former GM vice chairman Bob Lutz, said, “This is the ultimate bubble, which is doomed to burst. Tesla cars are fine, but the business model is not.” He says that a big problem with Tesla is its high cost of production which is not reflected in its sale price.

Matthew Stover, analyst at Susquehanna Financial Group, said, “The market is willing to say I’m going to value you based on what I think your future potential is, and it could be off of what you think they could make selling cars, what they could make selling batteries, what they could make selling solar or what they could make as a mobility company. Everything is on the table, and it’s all speculative.”

Elon Musk was born in South Africa and has an estimated net worth of $14.8 billion. He made $1.5 billion in 2002 when he sold Paypal to eBay.
Over the past three years, Tesla has made a total loss of $1.9 billion. Last year, it acquired unprofitable solar panel installer SolarCity. Globally, Tesla is now the 6th most valuable automaker.


Japan’s Business Confidence Increases for 2nd Straight Quarter

April 3, 2017


Business sentiment among Japan’s manufacturers has increased for the 2nd straight quarter. A weak yen has helped boost corporate profits to a record high. The Bank of Japan’s (BOJ) Tankan report is a survey given quarterly to more than 10,000 companies. It gave a reading of 12 this quarter, compared to 10 in the previous quarter. This is the highest reading since December 2015.

Takeshi Minami, chief economist at Norinchukin Research Institute, said, “The results simply confirm the economy is recovering. Exports are picking up and that’s having a positive impact on production and capital investment. Corporate earnings are good.”

Bank of Japan data shows that companies are positive on their capital expenditure plans. Also, Service sector’s outlook has improved for the first time in six quarters. The survey revealed that manufacturers were planning to boost capital spending by 0.6% in the fiscal year ending in March 2018. The results beat the forecast for a 0.1% drop in capital spending.

Yuichiro Nagai, an economist at Barclays Securities, said, “The tankan showed a balanced improvement in corporate sentiment at manufacturers and service-sector firms. Overall, the results support the BOK’s rosy view on the economy.”

However, the results were below the forecast of economists polled by the Wall Street Journal. Their consensus was 15. The survey also showed that Japanese firms are expecting deterioration in business conditions in the next quarter because of global trade risks such as Brexit and Trump’s protectionist initiatives.

Also, the businesses also forecast more weakness for the Japanese yen. They predict that the yen will reach 108.43 to a U.S. dollar. A weak yen is good for Japanese exporters as it makes their exports more competitive.

Marcel Thieliant, Senior Japan economist at Capital Economics, said, “While today’s Tankan survey showed that business conditions for large manufacturers did not improve as much as most had anticipated, the survey suggests that growth will remain healthy for now.”

Norio Miyagawa, Senior economist at Mizuho Securities, said, “There has been talk about the risks of protectionism, but so far Japanese companies are not taking any specific steps related to this. This tankan will reinforce expectations that the BOJ is on hold for the time being. We certainly don’t see the need to ease or tighten policy.”

Japan’s economy has been recovering well the recent months as global demand continues to improve. Inflation is expected to increase in the 2nd half of the year, and many analysts forecast the BOJ of cutting back on monetary stimulus measures.

Takashi Shiono, an economist at Credit Suisse Group AG, said, “The rise in confidence wasn’t as strong as expected and that’s a sign of cautiousness amongst companies. The ‘Trump rally’ is unwinding and the outlook for the U.S. economy is increasingly unclear.”

Japanese firms have a significant stash of cash pile and are still hesitant to put those into investment and wages. Wage negotiations early this year between the biggest Japanese companies and labor unions suggest pay increases are likely to be small this year.


Lululemon Shares Tumble as 4th Quarter Earnings Fall Shor

March 30, 2017


Canada’s Lululemon Athletica Inc. missed 4th quarter analyst expectations which led to its shares tumbling down by 18.2% to $54.25. According to Thomson Reuters, Wall Street’s consensus forecast for its earnings per share was 39 cents per share. However, the company only expects to make between 25 and 27 cents per share for the 1st quarter of 2017.

Lululemon’s earnings expectation for the fiscal year is in the range of $2.26 and $2.36 per share, and these estimations are below what Wall Street expects.

CEO Laurent Potdevin said, “We’ve clearly identified the issues: an assortment lacking depth and color for spring. We should have been bolder with the color assortment. Our teams have been course-correcting issues, with early indications reflecting positive impact on performance. We will see more color in selected styles as early as next week.”

4th quarter adjusted earnings per share increased to $1 and was below the consensus estimate of $1.01 per share. 4th quarter sales for Lululemon, however, beat Wall Street’s estimates.

The company boosted revenues by 12% to $790 million, and this was above the estimate of Wall Street which was $783.6 million. Its gross margin also beat expectations as it enjoyed a more efficient supply chain.

Executives added that the disappointing performance was due to poor online sales and fewer shoppers in brick and mortar retail stores.

As a result of the weak 4th quarter performance, the company expects that 1st quarter sales will also be poor. Another reason for the weak performance has been the stronger than expected Canadian dollar. The impact was noted to be 2 cents higher than it estimated.

Lululemon was the leader in “athleisure wear” market. It made yoga wear into mainstream fashion. Its success in this niche prompted competitors such as Nike Inc., Gap Inc., and Under Armour Inc., to join the lucrative market.

Potdevin said its focus this year would be to expand in China. On a related note, the men’s line of Lululemon is expected to grow rapidly and become a $1 billion-plus operation by 2020.

Despite the slow start to 2017, Lululemon executives expect full-year earnings to be between $2.55 billion and $2.6 billion. Earnings per share are expected to range between $2.26 and $2.36 a share.

Prices for Lululemon yoga pants are around $98, $52 for its energy bras and $48 for its T-shirts. One analyst noted that one worrying trend is that Lululemon’s loyal customers are purchasing less yoga pants.

Potdevin said, “Although we had a slow start to 2017, our teams are passionately committed to delivering on our robust plans across product innovation, digital, North America and international as we realize our ambitious vision for the future.”

Potdevin remains positive that Lululemon will reach its sales to $4 billion by 2020.

Neil Saunders, managing director of GlobalData Retail, said, “Lululemon is now coming up against tougher comparatives which will make growth more challenging. Moreover, it will have to contend with the saturation of a slowing athleisure market.”


Family Budgets Stretched Further Than Ever Before

June 21, 2016


According to a news report in April 2016, family budgets are being stretched to the limit. The NBC News report indicates that most consumers are spending more but their salaries are not keeping pace. The data, which was gathered by Pew Charitable Trusts, points out that basic expenses, such as health care, food, transportation and housing, all took up larger shares of people’s household incomes in 2014 than they did during the recessionary period in 1996. The squeeze in funds is especially felt among families whose household incomes are lower.

Budget

For example, a family of four made up of two children and two adult wage earners experienced an increase in their core income of about $10,000 between 1996 and 2014. However, basic costs increased by the same amount. Therefore, the percentage of a household’s income spent on expenses rose from 71% in 1996 to 75% in 2014. This type of increase, following the recent financial crisis in the US and elsewhere, is a clear representation of how household budgets can get strained.

Based on an examination of data from the Bureau of Labor Statistics, Pew concluded that –

  • Total household spending grew by approximately 25% between 1996 and 2014. However, income growth lagged significantly behind. In 2014, the average income had plunged 13% over a 10-year period while expenses increased by almost 14%.
  • Low income families expended much more of their income on basic needs than families in the upper income categories. Some lower income households went into the red.
  • Over the past 20 years, spending on housing has increased. However, lower income households spent the most on shelter (40%) when compared to middle income households (25%) or upper income wage earners (17%).

According to the news report, when most of a family’s budget goes toward necessities, families have less money for discretionary purchases. Discretionary purchases include such activities as dining out or entertainment. It is also more difficult to save money for any type of financial cushion.

A recent report published by Bankrate.com supports this data. The report found that about 63% of consumers surveyed said they currently do not have the additional money to for a health emergency or car repair without going into debt. According to economic experts, one of the biggest complaints about economic recovery has to do with salary growth.


Calgary City Hall’s Payday Loan Proposal Already Approved by Committee

June 13, 2016


Who says city hall doesn’t work fast?

Last month, the Calgary city hall task force requested that the municpitality clamp down on the payday loan industry. Despite the provincial government implementing its own set of rules and regulations for the industry, city councillors thought it would be a prudent move to adopt their own series of guidelines that can protect consumers from “predatory” payday lenders.

city hall in Calgary

A couple of weeks later, the payday loan proposal was approved Wednesday by the committee responsible for community and protective services. The payday lending and financial inclusion task force report suggested officials institute mandates for operators to display signs on debt counselling and money management and verbally inform customers about these services.

If payday loan stores were in violation of these rules then they’d pay a fine of $1,000.

Moreover, the city’s task force report recommended that the New Democratic Party-led province incorporate a financial literacy fund and establish a standard lending contract for clients.
The proposed rules will now go to city council for a vote. It’s unclear right now what its chances are of being approved or rejected.

This comes one year after the city prohibited payday loan businesses from opening in clusters.

Since last week, the payday loan industry said that municipal reforms would simply duplicate current measures as payday loan stores combat “devastating” restrictions from the Albertan government. However, one official says such rules would simply complement provincial regulations, and would not force businesses in this industry from leaving Calgary.

“These new regulations appear to be one more step in the direction to run legitimate payday loan businesses out of business. We don’t understand. Banks won’t lend money to the customers so we do and if it’s not us, who’s going to fill our shoes?” Landmarkcash.com public relations manager Carl Fitz.

“There are other jurisdictions in Canada and the U.S. with similarly restrictive rules or more restrictive rules and, contrary to payday lenders and critics, the reforms have not caused the industry to shut down and leave,” said Courtney Hare, a public policy manager with Momentum, a community economic development organization, in a statement.

The province put forward the Act to End Predatory Lending, also known as Bill 15. It would reduce payday loan fees from $23 to $15 for every $100 borrowed. The bill would also allow borrowers to repay their loans in installments rather than in lump sums.

Payday loan stores provide customers with high-interest, short-term loans. Proponents of the industry say it helps consumers to cover their rent or utility bill when they’re short on cash until their next paycheck. Critics, meanwhile, note that payday loans send consumers into debt that is hard to pay off. and that the banking industry needs to intervene to fill that void.

Across North America and Europe, governments have passed legislation reining in the payday loan industry. Some states in the U.S. have gone as far as banning payday loans altogether.


Study Shows Americans Feel they are not Saving Enough for Retirement

May 7, 2016


There has been a lot of press over recent years with regards to the concerns that many officials have when it comes to retirement savings amongst Americans. There are fears that huge numbers of Americans will find themselves in a situation where they can no longer afford to live in the way they have become accustomed to once they retire and in some cases people may struggle just to meet essential day to day costs once they are no longer working and earning a salary.

Retirement fund

It is not just officials that are concerned about this matter – a recent study showed that there are many American people who are only too well aware that they are not saving enough money to enable them to enjoy a comfortable retirement. In fact, most Americans are concerned that their retirement funds will not last long enough according to the report.

Tips to help those worried about retirement funds

Figures from the report showed that just over 30 percent of people who were in a retirement plan at work were very confident or extremely confident that their funds would last long enough. The majority of those polled as part of the study believed that they would outlive their funds and would spend part of their retirement seriously struggling when it came to finances.

One of the things that consumers are being advised to do in order to save for the future is to take inflation into account. Those who are planning to retire in twenty years or so will need double the retirement funds of those retiring now according to a report from Wells Fargo. This is something that savers need to take into account if they want to be able to maintain the same standard of living that they have become accustomed to.

Another tip from experts was for savers to continue investing in stocks. Officials said that even during retirement the long term returns from stock investments could outpace inflation in comparison to returns from bonds or cash savings. According to some officials, consumers should have a minimum of 40 percent of their portfolio in stocks when they retire.

Finally, the report suggests that people should wait as long as possible before they start collecting social security. Although this is something that can be done from the age of sixty two, experts have pointed out that retirees could get considerably more money each month if they wait until they are at least seventy years of age.