Posts Tagged ‘China’

Who Wants To Be a Millionaire?

Tuesday, July 10th, 2012

Wobbly economies that shook up markets in 2011 took their toll on the world’s rich, though fast-growing Asia for the first time had more millionaires than North America.  According to the report, the global personal wealth of people worth $1 million declined in 2011 for the second time in four years, a side effect of the Eurozone crisis and economic sluggishness in developed markets.  Several emerging markets also suffered, with the number of millionaires in India and Hong Kong falling by nearly 20 percent.  With Europe’s debt crisis bedeviling the continent, the outlook for wealth creation in 2012 remains weak, according to a report prepared by Capgemini and RBC Wealth Management.

The world’s millionaires grew by 0.8 percent to a record 11 million, according to the report, yet their collective wealth fell by 1.7 percent to $42 trillion.  Only the Middle East experienced no decline in wealth.  It was the first global decline in millionaire wealth since the 2008 financial crisis, when the ranks of the wealthy fell 15 percent and their wealth declined by 20 percent.

Families worth $30 million or more saw their collective wealth fall 4.9 percent and their ranks shrink by 2.5 percent to just 100,000 individuals.  This decline reflects holdings in higher-risk and less liquid investments like hedge funds, private equity and real estate.

“It was a challenging environment for our clients,” George Lewis, global head of wealth management at Royal Bank of Canada, said.  The Toronto banking giant began sponsoring the widely watched report in May.  Lewis pointed out that the number of high net worth individuals rose even as overall wealth fell.  “It at least suggests there continues to be upward mobility and the ability to generate wealth around the world,” he said.

Curious about how many millionaires live in nations around the world?  Read this:  Singapore toppled Hong Kong as home to Asia’s wealthiest in 2011 as declining stock markets hit the former British territory significantly harder than its Southeast Asian rival.  Hong Kong, whose stock market capitalization fell by 16.7 percent last year, saw a bigger decline in the ranks of people with more than $1 million to invest as a larger proportion of that wealth was tied up in equity.  Southeast Asia also has shown stronger signs of resilience to global turmoil than the rest of Asia as domestic spending offset struggling exports.  The number of millionaires in Hong Kong fell 17.4 percent to 83,600 last year, compared with a decline of 7.8 percent to 91,200 people in Singapore, according to RBC Wealth’s head of emerging markets Barend Janssens.  Hong Kong took the lead from Singapore in 2010 after falling behind in 2008.

China still is home to the most high net worth individuals in Asia Pacific, with a population of 562,000 millionaires.  The top five countries by population of high net worth individuals are the US (3.07 million), Japan (1.82 million), Germany (951,000), China and the United Kingdom (441,000).  According to RBC, this significant concentration of high net worth individuals is why wealth managers are attracted to Asia even if they have to contend with competition from domestic banks.

Are the troubles in the Eurozone likely to impact Asia?  Lessons learned from the 2008 financial meltdown show that while Asia tends to get hit when the world economy stumbles, the severity varies depending on which countries have the biggest trade and financial linkages, and are best-prepared with big currency reserves, overflowing government coffers and central banks with the ability to cut interest rates.  Generally speaking, Asia has more room than the West to react with interest-rate cuts and government spending.  But some things have changed since 2008, and some countries, primarily India, Vietnam and Japan, may not be in shape to survive another financial jolt.  “As we saw with Lehman, when you get a seizure in the global financial system, nobody can hide from that in the short run,” said Richard Jerram, chief economist at the Bank of Singapore.  In that type scenario — which analysts say could still occur if Greece doesn’t live up to its commitments and leaves the Euro, or Spain and Italy require a bailout that Europe can’t afford — Asian stocks and currencies would fall, shipping lanes would see less business, and lending to consumers and businesses would dry up, slowing world economies.

Chinese Conglomerate Buys AMC to Create World’s Largest Theater Chain

Tuesday, June 5th, 2012

Chinese conglomerate Dalian Wanda Group Company is buying the movie theater chain AMC Entertainment Holdings, for $2.6 billion in China’s biggest takeover of an American company.  The purchase reflects the global ambitions of a wave of cash-rich Chinese companies that are speeding their expansion by obtaining foreign skills and brand names.  According to Wanda, the transaction will create the world’s largest movie theater operator.  The Beijing-based company will invest $500 million to fund AMC’s development.  AMC operates 346 movie theaters, primarily in the United States and Canada, and has 23 of the 50 highest-grossing U.S. outlets.

We support AMC becoming bigger, not only in the United States but in the global market,” said Wanda chairman Wang Jianlin.  The deal reflects increasing Chinese investment in U.S. corporate assets.  The transaction is the third-largest Chinese corporate investment in the United States, according to financial research firm Dealogic.  It ranks behind investments by Beijing’s sovereign wealth fund, the China Investment Corporation, of $5 billion in Morgan Stanley and $3 billion in Blackstone Group LP, both for minority stakes in 2007.  Chinese companies had invested $34.8 billion in the United States by the end of 2011 in industries such as auto parts, agriculture and steelmaking, according to Derek Scissors, a China analyst at the Heritage Foundation.

Globally, mergers and acquisitions by Chinese companies total $16.8 billion so far in 2012, a six percent increase over the same period last year, according to Dealogic.  Wanda said AMC’s American management will remain in place and the headquarters will stay in metropolitan Kansas City.  It said the firm’s 18,500 employees would not be affected.

Established in 1988, the privately owned Wanda operates hotels, department stores, tourism and other businesses and had 2011 revenue of $16.7 billion.  The company employs 50,000 and its assets include 86 theaters in China.  AMC’s previous owners were Apollo Global Management, Bain Capital, the Carlyle Group, CCMP Capital Advisors and Spectrum Equity Investors.  AMC has reported losses for the past three years but its CEO, Gerry Lopez, said it has been profitable again this year due to strong ticket sales.

Wang said AMC’s financial problems were due to the high cost of servicing its substantial debt and that conditions should improve once Wanda’s cash allows it to pay off some of that.  “We are confident that after the merger, AMC will turn positive,” he said.  “We have absolute confidence in the future of the company.”

The acquisition comes as Hollywood is looking to China both for its fast-growing audience and for production partners.  Walt Disney Company’s next “Iron Man” movie will be co-produced with a Chinese partner and “Chinese elements” will be added to the story.  DreamWorks Animation SKG Inc., announced a venture in March with three Chinese companies to make animated and live-action films.  Wang said Wanda has applied to China’s government for a license to import movies.  He said the AMC acquisition concerned only film exhibition and not production or distribution.  “We have no plans to promote Chinese films in the United States,” Wang said.  “Mr. Lopez will decide what movies will be shown” in AMC theaters.

Wang and Lopez said the two companies will share experience in the film business.  Wang said Wanda is considering more overseas acquisitions for its entertainment, hotel and retail units.  “We want to be a big company, not just in China but in the world,” he said.

Wanda has been the largest theater owner in the second-largest film market in the world Now, the deal makes it also the owner of the second-largest theater chain in the largest film market,” said Chen Zheng, manager of Saga Cinema in Beijing.  Statistics from the State Administration of Radio, Film and Television indicate that Wanda Cinema Line generated 1.785 billion yuan ($282.4 million) in box office revenue in 2011, ranking first domestically.  Ticket sales totaled 13.12 billion yuan that year.

Writing for Slate, Richard Beales says that “Landing the largest purchase ever of an American target by a private acquirer from the People’s Republic will make waves.  And becoming the world’s biggest owner of cinemas will also boost Wanda’s global profile.  That is part of the motivation, and both the parent company — which claims $35 billion of assets — and its domestic cinema unit have explored the possibility of initial public offerings, according to news reports.  But the bigger rationale is surely to learn more about how to attract China’s increasingly affluent and urban citizens to giant movie complexes and sell them junk food to munch on.  Adding entertainment options to property developments is all the rage in the Middle Kingdom, and Wanda is a leading proponent.  The exchange of information on its high-grossing U.S. theaters, and potentially on technology like IMAX, will help Wanda.”

Bonn Climate Change Summit Has Its Own Storm Clouds

Monday, June 4th, 2012

Disagreement emerged early during the latest round of international climate change talks in Bonn, with the European Union (EU) and developing countries clashing over the future of the Kyoto protocol.  Under the terms of last year’s Durban Platform, the EU had agreed to sign an extension of the Kyoto protocol before it lapses at the end of this year in return for an agreement from all nations that a new binding treaty will be completed by 2015 and enacted by 2020.

Climate negotiators want to build on the progress achieved in Durban last year, like the agreement on a second commitment period for the Kyoto Protocol, a treaty which limits the emissions of most developed countries but which expires at the end of this year.  The length of the second commitment period is one of the issues under discussion in Bonn.  Unfortunately, Kyoto plays an progressively more marginal role in the climate-change issue because it doesn’t include the biggest emitters of carbon dioxide and other gases that contribute to global warming.  The United States exited Kyoto, claiming it was unfair because it didn’t impose any emissions reductions on fast-growing developing nations such as China and India.  Canada also said it would withdraw from the treaty last year.

Last year’s United Nations (U.N.) climate talks in Durban supported a package of measures which would ultimately force the world’s polluters to take legally binding action to slow the pace of global warming.  Delegates agreed on the “Durban Platform for Enhanced Action” – a process that would apply to all parties under the U.N.’s climate convention.  A clear timetable and targets have not yet been set.  “Parties need to think between now and Doha how they want to organize their work between now and 2015 and how they will move towards that legal agreement,” Christiana Figueres, executive secretary of the U.N.’s Framework Convention on Climate Change, said.  “My hope is they will establish milestones along the way so they are able to measure their progress.”

Figueres cited new research that predicts that the Earth’s temperature could rise by as much as five degrees Celsius (41 degrees Fahrenheit) from pre-industrial levels on current pledges.  “We still have a gap remaining between intent and effort,” Figueres said.

Additional issues discussed in Bonn and at a larger climate change conference in Qatar later this year include implementing an extension to the Kyoto Protocol; how long that will last; how to raise ambition on emissions cut pledges, as well as raising long-term financing to help vulnerable countries adapt to the harmful effects of climate change.

The treaty currently being negotiated would require all nations to curb warming.  Identifying those requirements is the primary challenge, which is why negotiators are focusing on solving incremental, less contentious issues before moving on.  “First and foremost we have to ensure that there is no backtracking on what was agreed in Durban,” said Christian Pilgaard Zinglersen, a Danish official representing the European Union.  Climate activists warned that potentially disastrous consequences of global warming, including floods and droughts and rising sea levels, will be impossible to prevent unless the pace of negotiations accelerates.  “If you look at the science, we’re spending time we don’t have,” said Tove Ryding, Greenpeace’s climate policy coordinator.

We have all the means at our disposal to close the gap, and the long-term objectives of governments remain attainable,” Figueres said.  “But this depends on stronger emissions reduction efforts, led by industrialized countries.  A sufficient level of ambition to support developing country action, concrete and transparent implementation, today, tomorrow and into the foreseeable future, is the answer.  Progress here in Bonn can give countries the confidence they need to push ahead with national climate policies.  In turn, many countries are beginning to adopt ambitious climate change legislation, which is sending good signals to the international negotiations.  All of this can give society and businesses confidence to act faster themselves.”

Tepid 1st Quarter Growth Disappoints

Tuesday, May 15th, 2012

The American economy grew less than expected during the 1st quarter as the biggest gain in consumer spending in more than a year failed to overcome a diminished contribution from business inventories.  Gross domestic product rose at a 2.2 percent annual rate after a three percent increase in the 4th quarter of 2011, according to Department of Commerce Department statistics.  The median forecast called for a 2.5 percent increase.  Household purchases rose 2.9 percent, exceeding the most positive projection.  Home building grew at its fastest pace in almost two years.  The GDP data confirm the view of Federal Reserve officials who expect “moderate” growth as they repeated that borrowing costs are likely to stay low at least through late 2014.

In addition to the improvement in consumer purchases and home building, the economy benefited from a rise in auto production.  The GDP was negatively impacted by a drop in government spending and slower growth in business investment.  The United States is faring better than some other major economies.  The United Kingdom is in the throes of its first double-dip recession since the 1970s.  In Japan and Germany, GDP declined in the final three months of 2011, while China’s economy, the world’s second-largest, is also cooling.

“Consumers are remarkably stable and steady,” said Julia Coronado, chief economist for North America at BNP Paribas in New York.  “We’ll need to see final demand continue to improve.  We’re still in muddling-along territory.”

According to MarketWatch, the devil is in the details. “Growth of 2.2 percent is mediocre, but it’s worse than that once you peel away a few layers — about a fourth of the growth in gross domestic product was accounted for by a build-up in inventories, and half of it came from the building and selling of motor vehicles.  Strip away the inventory growth, and final sales in the economy increased 1.6 percent, the 4th quarter in the past five that was below two percent.  Although all the headlines report on the GDP numbers, the number to watch is final sales, because that gauges demand for our products, not merely how much we made.  Away from King Consumer, the rest of the economy is slowing.  Business investment spending dropped 2.1 percent, the first decline since 2009.  Let’s not get carried away too much by the gloom and doom.  The economy IS growing, even if it’s not as fast as we’d like.  The economy has grown by nearly seven percent since depths of the recession in 2009.”

As disappointing as the 2.2 percent is, the market will have to learn to live with lowered expectations.  From a market perspective, lukewarm growth could force Ben Bernanke’s hand to unfreeze lending, keep interest rates at their current lows, or re-use other monetary policy tools to keep money flowing.  Ironically, even with the Fed’s relaxed monetary policy, most of the extra cash in the economy remains on corporate balance sheets (Apple has billions on hand) or is going into the securities markets.

Official reaction was as expected. “Today’s advance estimate indicates that the economy posted its 11th straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.2 percent annual rate in the first quarter of this year.  While the continued expansion of the economy is encouraging, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007,” said Alan Krueger, chairman of the White House’s Council of Economic Advisers.

Fed chairman Ben Bernanke called the slow pace of recovery “frustrating. Here we are almost three years from the beginning of the expansion, and the unemployment rate is still over eight percent.  It’s been a very long slog.  And that, I think, would be the single most concerning thing,” he said.

Great Recession Had Little Impact on CO2 Emissions

Tuesday, December 20th, 2011

Worldwide CO2, emissions have risen by nearly 50 percent in the past several decades, with 2010 now holding the record as the year with the most greenhouse gas emissions on record.  Burning fossil fuels released more than 36 billion metric tons of CO2 in 2010, due primarily to growth in China, India, and the United States.  Deforestation is another core cause.

Going back half a century, nothing seems to have set back emissions for many years and that includes the Great Recession that started in late 2008, according to a new study published in the journal Nature Climate Change. Other studies indicate that mankind has burned approximately 50 percent of available fossil fuels if we don’t want the climate to warm by more than two degrees Celsius.  More to the point, we’ll need zero or negative emissions and emissions to peak sometime this decade to avoid any further warming.

Emissions rose approximately 510 million metric tons of carbon to reach 9.14 billion tons in 2010, the most in records dating to 1959, according to the Global Carbon Project.  That represents a 5.9 percent increase, the largest since 2003, when they jumped six percent.  The 2010 global emissions were 33.5 billion tons when converted to carbon dioxide.

“We’re going exactly in the wrong direction for limiting global warming,” said Corinne Le Quere, co-author of the Global Carbon Project’s report and a director of the Tyndall Centre for Climate Change Research at the University of East Anglia, England.  “Governments need to develop ways to boost the economy using renewable energy,” she said.

“Global CO2 emissions since 2000 are tracking the high end of the projections used by the Intergovernmental Panel on Climate Change, which far exceed two degrees warming by 2100,” Le Quere said.  “Yet governments have pledged to keep warming below two degrees to avoid the most dangerous aspects of climate change, such as widespread water stress and sea level rise, and increases in extreme climatic events.”

There’s growing evidence that 2011 will almost certainly be the 10th warmest on record, and the hottest featuring the La Nina phenomenon that brings cooler waters to the surface of the Pacific Ocean, the World Meteorological Organization (WMO).  “There’s clearly a warming trend.  That’s supported by other indicators such as disappearing Arctic sea ice, melting glaciers and rising sea levels,” Peter Stott, head of climate monitoring at the U.K. Met Office, whose own temperature estimates feed into the WMO data, said.

“The global financial crisis was an opportunity to move the global economy away from a high-emissions trajectory.  Our results provide no indication of this happening,” according to the study’s authors.  The study was issued at a planet-warming gases panelat U.N. climate talks in Durban, South Africa.

Writing on Times’ Ecocentric blog, Bryan Walsh notes that “The study underscores just how little we’ve done to slow the increase in carbon emissions. Since 1990 –the base year for the Kyoto Protocol –carbon emissions from fossil fuels have increased by 49 percent, making a mockery of that global treaty’s ambition to cut emissions by at least five percent.  And it’s getting worse –on average, fossil fuel emissions have risen by 3.1 percent a year between 2000 and 2010, three times the rate of increase seen during the 1990s, even as global warming has become a global concern.

According to a Nature blog, “What’s new in this analysis is that it puts the recovery in context with previous global crises.  It also updates a novel type of carbon dioxide accounting pioneered by lead author Glen Peters, who is at the Center for International Climate and Environmental Research in Oslo.  Usually, and under the Kyoto Protocol, carbon dioxide emissions are identified with the nation that produces them.  Yet rich countries have largely achieved cuts in CO2 emissions since 1990 by importing goods made elsewhere.  Around one-fifth of China’s emissions, for example, come from making goods demanded by consumers in other nations.  If you count the CO2 emissions embodied in final consumer demand, the study shows, Kyoto’s ‘developed’ countries are consuming more carbon dioxide now than they did in 1990 — although they report cuts in domestic production.  Even so, 2009 marked the first time that developing countries consumed more carbon dioxide than developed countries.  The crisis may not have fully passed, and it’s too early to tell whether the green stimulus packages introduced in recent years will have a positive impact, the study says.  For the moment it’s sobering to think that the pain caused by the financial crisis made but a small dent in global CO2 emissions.”

A Long Night in Brussels Ends With a Greece Debt Deal

Tuesday, November 1st, 2011

The midnight oil burned in Brussels as European finance ministers, heads of state, bankers and the International Monetary Fund (IMF) try to reach an agreement to restructure Greek debt.  In the deal, private banks and insurers would accept 50 percent losses on their Greek debt holdings in the latest bid to reduce Athens’ immense debt load to sustainable levels.  Although it required more than eight hours of negotiations that did not end until 4 a.m., the deal also anticipates a recapitalization of hard-hit European banks and a leveraging of the bloc’s rescue fund, the European Financial Stability Facility (EFSF), to give it €1 trillion ($1.4 trillion).

Significant work remains to be done to assure that the rescue works as envisioned.  Several aspects of the deal, including the technicalities of boosting the EFSF and providing Greek debt relief, could take weeks to firm up; the plan to rebuild confidence after two years of crisis could unravel over the details.  “I see the main risk is that we are left waiting too long again for the implementation of these agreements,” European Central Bank (ECB) policymaker Ewald Nowotny said.  “Speed is very important here.”  According to Greek Prime Minister George Papandreou, “The debt is absolutely sustainable now.  Greece can settle its accounts from the past now, once and for all.”

European Union (EU) President Herman Van Rompuy said that the deal will slash Greece’s debt to 120 percent of its GDP by 2020.  Under current conditions, it would have soared to 180 percent.  Achieving this will require that banks assume 50 percent losses on their Greek bond holdings — a hard-to-swallow pact that negotiators now must sell to individual bondholders.  According to Van Rompuy, the eurozone and IMF — which have both propped up Greece with loans since May of 2010 — will give the country another €100 billion ($140 billion).  That’s slightly less than amount agreed in July, primarily because the banks now must pick up more of the slack.  “These are exceptional measures for exceptional times.  Europe must never find itself in this situation again,” European Commission President Jose Manuel Barros said.

While some question whether Greece will be able to meet its debt obligations by the drop-dead date, the fact that leaders were able to finally put concrete numbers to what had previously been little more than vague promises represents an important step forward.  “It’s great news that we’ve got an agreement,” said Deutsche Bank economist Gilles Moec.  “When Europe puts its heads together, they do actually begin to cooperate.”

Greece, whose crippling debt load has in principle been cut in half in the deal that Papandreou says marks “a new day for Europe and for Greece,” emerges as the biggest winner.  Although the necessary austerity measures will be tough for the Greek people to live with, the new plan has set the country on a sustainable debt trajectory, according to Moec.  “At least the deal gives Greece a fighting chance.  It’s not great, it would be much better if we could get the debt below 100 percent…but it’s doable.”

Germany, which had been the driving force behind compelling the banks to take a bigger “haircut” or write down on Greek debt, is another winner.  “If you look at the vote in German parliament outlining what Germany was going to ask for at the summit, and then you see the results of the summit, it’s basically identical,” Moec said.  German Chancellor Angela Merkel believes that the deal is a victory for Europe in general.  “Everybody was aware that the whole world was looking at this meeting,” she said.  “I think that tonight we Europeans have taken the right measures.”

Writing for Reuters, Global Economics Correspondent Alan Wheatley sees some reason for skepticism.Greece, however, has become something of a sideshow.  Investors long ago judged that it was not just illiquid, but insolvent.  Much more critical is what the eurozone could do to prevent the debt rot from spreading to bigger, systemically important but stagnant economies, notably Italy.  Markets will have to wait for details as to how the EFSF will be scaled up; whether the likes of China will top up the bailout fund; and how operationally it will enhance the credit of member states’ new bonds.  But some analysts are skeptical.  Economists at Royal Bank of Scotland said they expected markets to re-price sovereign debt across the euro area given the size of the losses imposed on Greece.  Expressed as the ‘net present value’ of the bonds, the proposed loss will be close to 70 percent, much more than the 40 percent hit that banks had volunteered to take, RBS said.  What’s more, the EFSF will be too small to offer help to any country that might need it for any length of time.  And a promise by governments to help banks regain access to long-term bond market funding implies they will have to assume extra contingent liabilities, thus adding to their debt burdens.”

Time’s Bruce Crumley is more hopeful. According to Crumley, “Let’s hope that upbeat attitude persists, but let’s not be stunned if it doesn’t.  Because let’s be honest about another reality of Thursday’s development: it was only the most recent play by governments in a global confidence game that’s certain to shift and surge again before it’s all over.  That’s not ‘confidence game’ in the usual, illicit ‘con’ sense.  Instead it more literally describes attempts by EU leaders to inspire confidence and calm in financial markets so they’ll cease the doubt-inspired dumping of bonds, and bets against iffy sovereign debt that severely complicates efforts by eurozone officials to overcome current crisis.  To that end, the relatively timid action taken earlier by European leaders was subsumed by the far more dramatic measures adopted  — an emphatic upward ratcheting designed to prove their determination to tackle the evolving catastrophe once and for all.”

Renewable Energy Industry Meets Challenges Head On

Thursday, October 27th, 2011

The renewable energy industry is facing serious challenges from competition subsidized by foreign governments and restrictive regulations on the home front.  This was the consensus at the recent Solar Exchange East 2011, attended by academics, solar entrepreneurs, engineers, investors, supporters and government officials at the McKimmon Center at North Carolina State University in Raleigh.

Larry Shirley, director of the Green Economy program at the North Carolina Department of Commerce’s Energy Division, said that “Policies and incentives are the building blocks” for the solar industry.  Participants generally called for an end to government preference for fossil fuels, while critics believe the traditional means of letting private investors and the market dictate the industry’s direction is the optimal policy.

“Subsidies are basically a waste of taxpayers’ money, a form of corporate welfare,” said Roy Cordato, the John Locke Foundation’s vice president for research and resident scholar and one of the critics.  “These (renewable energy ventures) are grossly inefficient.  If they weren’t, they wouldn’t need government subsidies.”

“This is a robust environment,” said Rick Myers, director of the Solar Vertical Market Management program for Siemens.  “The U.S. solar market grew 67 percent, from $3.6 billion in 2009 to $6 billion in 2010.  Solar electric installation In 2010 totaled 956 megawatts.  There’s no doubt the U.S. government needs to get more involved in this effort from a policy standpoint.  The solar panels are 50 percent of the cost for installation and these prices are going way down.  The fact of the matter is the competition is extremely difficult in that area.  It’s coming from the Pacific Rim and China.”

In a related move that boosts renewable energy, a U.S. Treasury Department grant program that pays for up to 30 percent of a solar project’s costs would add 37,394 jobs to the economy in 2012 has been extended for one year, according to the Solar Energy Industries Association (SEIA).  The program, part of the 2009 economic stimulus package, was due to expire at the end of 2011 after an initial one-year extension was passed by Congress last December.  A second extension will boost solar jobs by 12 percent as developers increase installations by 2,000 megawatts, or enough for about 400,000 homes.  More than 100,000 Americans currently work in the solar industry, double the number in 2009, said Rhone Resch, SEIA’s chief executive officer.  “Much of the jobs and industry growth has come out of that program,” Resch said.  “The last thing the government should do in a fragile economy is eliminate a tax break that creates jobs.”

With the grant program, developers can obtain the equivalent amount in cash and write off assets more quickly.  The solar industry has received more money from the grant program than any other renewable energy sectors with the sole exception of wind.  “The (program) has been the most effective policy in driving economic and job growth in the past two years,” Resch said.  “As we continue to slog through a sluggish economy, the tax equity market remains in a much smaller capacity than where it was in 2007.”

Writing for Renewable Energy World.com, Elisa Wood says that “We hear a lot about the job-building benefits of renewable energy when it draws manufacturers and developers to local communities.  Less talked about are those who arrive well before the shovels, steel, factories and jobs.  These are the green-energy entrepreneurs – the creative thinkers and risk takers responsible for the rise of clean energy ventures over the last decade.  Others entering the industry are veterans of energy, finance, agriculture, telecommunications, high tech, science, transportation, construction, nanotechnology and commerce, all drawn by enormous opportunity, as the largest economies in the world spend an expected $2.3 trillion over the next decade to revamp industrial-age energy apparatus into cutting-edge technology.  Green energy entrepreneurs emerge from throughout North America, Europe and Asia, but they tend to congregate in high-tech regions such as Silicon Valley, an area of California becoming as much about energy as it is the internet.  ‘You can’t throw a softball around here without hitting another solar company,’ says Dan Shugar, one of the solar industry’s early pioneers and now chief operating officer of Solaria, a Fremont, CA-based company that makes silicon photovoltaic products.”

Saab Story

Thursday, July 7th, 2011

Venerable Swedish automaker Saab is unable to pay its employees and is likely headed into bankruptcy.  Saab and Zeewolde, Netherlands-based owner Swedish Automobile NV, are in talks to raise cash, the company said.  Options include selling and leasing-back the factory in Trollhaettan, Sweden.  “There can however be no assurance that these discussions will be successful or that the necessary funding will be obtained,” said Swedish Automobile, which was previously known as Spyker Cars NV.

Saab’s chances are “slim,” according to Martin Crum,  an analyst at Amsterdam’s Effectenkantoor BV.  “The company is still not able to produce cars; that’s the main concern.  If you don’t sell cars, you don’t get cash in.”  The pending property sale “can provide some badly needed liquidity for the short term, but for the longer term they of course need more,” Crum said.  Saab came close to being a casualty of GM’s brand shedding after its government-backed bankruptcy, when it stopped the production of Saturn, Hummer, and Pontiac cars.  The Swedish unit was slated to shut down after a group led by Koenigsegg Automotive AB pulled out of talks.  Spyker’s bid came after GM had already begun to shut down Saab, ultimately paying $74 million in cash and $326 million in preferred shares.

A spokeswoman for Saab admitted that approximately 2,200 office workers, designers and engineers might not be paid as Sweden goes into a holiday.  Apologizing for leaving production line staff without paychecks, she said “The last thing we want is to be forced to come with this very sad news the day before a major Swedish holiday.  We would not have done this if we were in a situation where we had an alternative.”  She said Saab was not actively preparing for bankruptcy, but the carmaker is making an eleventh-hour bid for cash by negotiating a sale-and-lease back of its Trollhättan factory with unnamed parties.  “(Bankruptcy) is not the scenario that we are working with.  We are working very intensively on securing short-term financing to improve the situation of the company, of course to pay our employees and to work with suppliers to get production going again.”

Neil King, an analyst at IHS Automotive, said Saab seems to have been left behind by the emerging market boom in nations such as Brazil, China and India.  “They suffered as a result of the financial crisis but unlike their peers, they have not capitalized on booming demand for premium cars in the emerging markets.”  Saab production fell sharply from 123,000 in 2007 to 33,000 in 2010.

Swedes are mourning the waning of the Saab brand,  which was established in 1937 and became one of two internationally known Swedish automakers along with Volvo.  At present, Saab appears to be on its last leg as there has been no recent talk of a government bailout or rescue plan.  Upon hearing the news, one employee said “It is dreadful.  Completely unbelievable.  I get chest pains,” worker Fredrik Almqvist said.  “How on earth are we supposed to pay our bills?”  “I have worked at the factory and know many who worked there.  You should never give up hope, but right now it looks extremely bleak,” Veli-Pekka Saikkala, a representative of IF Metall, said.

Writing on the Automobile website, Donny Nordlicht  says that Saab appears to have had a bit of a reality check, as its latest press statement says ‘There can, however, be no assurance that these discussions will be successful or that the necessary funding will be obtained.’ Saab’s newfound realistic outlook is not assuaging fears, however.  IF Metall is demanding that the automaker pay its members wages, saying it needs to resolve the short-term cash flow issues immediately.  If Saab does not pay up, IF Metall has threatened to enter legal proceedings to procure the wages, something that would most likely end only in bankruptcy for the automaker.”

As Global Oil Consumption – and Prices – Rise, OPEC Rejects Increased Production

Monday, June 20th, 2011

As gas prices seesaw up and down at the pump and Americans reluctantly pay more to fill their tanks as the economy slows, OPEC (the Organization of Petroleum Exporting States) could not agree on whether or not to increase production and provide some relief. The two key factors are Saudi Arabia and Iran. At an unusually contentious meeting, the 12-nation group could not reach agreement on new production targets.  That sets the stage for higher prices for oil and gas later this year as world demand for oil rises faster than supplies.  Saudi Arabia favored an increase in output, which likely would have translated to lower oil prices.  Other countries – such as Iran — resisted, arguing that oil supplies are adequate to meet demand and current prices are on target.  “We are unable to reach consensus,” OPEC Secretary General Abdullah Al-Badri said.  Saudi oil minister Ali Naimi called the meeting “one of the worst ever.”

Writing on the Salon website,Andrew Leonard points out that China is partially to blame for high prices at the gas pump.  According to Leonard, “If you want to know why gas prices are high, and why, in the long run, they will keep getting higher, all you need to do is peruse BP’s Statistical Review of World Energy 2011 report. Bottom line:  World oil consumption hit an all-time record high of 87.4 million barrels a day in 2010, driven by a surge in demand from emerging nations, but primarily led by China.  China has now overtaken the U.S. as the world’s largest energy consumer, with demand for all kinds of energy growing 11.2 percent in 2010.  In 2010, Chinese oil consumption grew by 860,000 barrels a day.  Since 2000, China’s oil consumption has grown an incredible 90 percent.  Supply, globally, is not keeping up with demand growth. And barring a major global economic meltdown, that dynamic is not going to change.  The rest of the world is going to continue to consume more oil, and finding and developing new sources of oil is going to continue to get more expensive.  And Obama can’t do a damn thing about it, except to put in place policies that encourage U.S. consumers to consume as little oil as possible.”

The Saudis and the Iranians frequently lock horns over pricing at OPEC meetings.  Typically, however, member nations follow Saudi Arabia’s lead, which produces most of the group’s oil.  This time the Saudi-Iranian rivalry resulted in a deadlock.  The International Energy Agency (IEA) had urged oil producers to put more crude on the market.  “Ongoing supply disruptions, as well as the fragile state of the global economy, call for a prompt increase in supply,” the agency said.  Iran, the second largest OPEC member after Saudi Arabia, is the leading price “hawk,” favoring expensive oil.  Saudi Arabia has consistently acted to moderate prices.

“Looking to the remainder of this year, the expected supply/demand balance indicates a tightening market,” OPEC’s report said. “As a result, global inventories could continue to decline as the market enters a period of high seasonal demand.”  OPEC’s member nations include Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

According to the IEA, demand for OPEC crude will average 29.95 million bpd (barrels per day)  in the 2nd half of 2011, or 1.2 million bpd more than April production of 28.75 million bpd.  Analysts said OPEC’s report had minimal impact on oil prices and a bigger focus would be the IEA’s latest forecasts.  “It’s absolutely market neutral,” said Olivier Jakob of Petromatrix.  “What’s going to matter more is the IEA report when we will be able to see if there are any more changes.”  OPEC’s May oil output rose by approximately 171,000 bpd to 28.97 million bpd as extra supplies from Saudi Arabia, Nigeria and Iraq offset declining production from Libya.  The report said Saudi output totaled 8.86 million bpd in May.  Saudi newspaper al-Hayat reported that Riyadh would boost supplies to 10 million bpd in July and oil traders said the kingdom was offering more to Asian customers, because they are driving the increase in global demand.  The world is expected to use 1.38 million bpd of oil more this year than in 2010, OPEC’s report said.

OPEC’s daily production is bound by quotas of 26.32 million bpd in May of 2011, according to the group’s monthly report.  That’s an increase from 26.17 million bpd in April, OPEC said.  Saudi Arabian output climbed to 8.86 million bpd in May, compared with 8.8 million in April.  OPEC’s total supply, including Iraq, was 28.97 million bpd May compared with 28.8 million the previous month.  Libyan supplies fell to 169,000 bpd in May as the conflict between forces loyal to Muammar Qaddafi and anti- government rebels halted output.  That compares with an average 1.56 million last year.  OPEC, which provides approximately 40 percent of the world’s crude oil, announced its biggest-ever supply cuts in late 2008 when the financial crisis caused a collapse in global demand.  The decision capped production at 24.845 million bpd for all members except Iraq, which is exempt from the quota system.

Now we are unhappy that we did not reach a decision but this is not the end of the world,” al-Badri said.”It was not political, it was really an economic situation.  Of course, for the past six years we have enjoyed a very relaxed atmosphere, now we have some tension.  I hope we will overcome it.”

Where’s Our Recovery? Job Growth and Productivity Falter

Monday, June 13th, 2011

Sluggish job growth in May could be a sign that the economic recovery is losing momentum.According to the ADP May Employment Report, a mere 38,000 jobs were added in the private sector on a seasonally adjusted basis.  That was well below consensus estimates of 170,000 new jobs.  The report also revised downwards the estimated change from March to April from 179,000 to 177,000. “A deceleration in employment, while disappointing, is not entirely surprising,” the report said.  “In the 1st quarter, GDP grew at only a 1.8 percent rate and only about 2¼ percent over the last four quarters.  This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment.”

Patrick O’Keefe, director of economic research at J.H. Cohn, said that although some seasonal factors may have been at work in the recent claims data and in the ADP estimates, the report still disappointed.  “We can put away our balloons and party hats today,” he said.  “We expected a pull back in the rate of acceleration, instead we got deceleration.  It appears that the general expansion has lost a bit of momentum and employment numbers, which were already lethargic, are slowing further.”

“This only adds fuel to the argument that the slowdown story is here in the U.S.,” said Tom Porcelli, chief economist at RBC Capital Markets.  “I am fairly confident that people are going to be scaling back their estimates for nonfarm payrolls.  While it is a good thing that small and medium-sized companies are adding payrolls, there is no doubt that the pace has slowed.  This is exactly what we do not want when other significant data shows things are slowing down as well.  Having said that, I still do not believe the Fed will initiate QE3.”

Writing in the National Journal, Jim Tankersley takes a more optimistic viewpoint. According to Tankersley, “Reality is a little more positive and a lot more complicated than that.  Wall Street analysts are fairly united in their view that the recovery has entered a “soft patch,” just like it did last year, and that sooner or later, growth and job-creation are on track to pick up again.  Several analysts and columnists have been reminding Americans that recoveries from financial crises can often feel like stop-and-go traffic on the freeway.  For now, the economic brakes seem to be pumping.  The 2010 slowdown flowed from worries over Europe’s sovereign debt crisis.  This one is likely a combination of several factors.  The spike in oil and food prices has spooked confidence — though consumers are still spending apace, dipping into their savings to keep up — and may be driving businesses to scale back hiring.”

On the MarketWatch website, Rex Nutting says that “If you recall that government employment is declining by almost that much every month, the ADP report implies only a very small increase in total employment.  This is no way to get the unemployment rate down from nine percent.  The economy has been buffeted by both natural and man-made forces.  Extremely bad weather earlier in the year depressed activity, as did the surge in commodity prices, especially for energy and food.  Then the Japanese earthquake and tsunami knocked out vital supply chains.  Global economic growth, which had given a big boost to U.S. exporters, is slowing. Europe is dead in the water, so is Japan.  The fast-growing developing nations such as China, India and Brazil are downshifting to avoid overheating.  The strongest sector of the U.S. economy — manufacturing — is still growing, but the momentum is fading.  The Institute for Supply Management’s closely watched diffusion index (Defined by Investopedia as “A measure of the breadth of a move in any of the Conference Boards Business Cycle Indicators (BCI), showing how many of an indicators components are moving together with the overall indicator index) plunged by 6.9 points to 53.5 percent in May, the largest one-month decline since 1984.

Companies may need to start hiring again as a new report from the Department of Labor is showing that the productivity of American workers slowed in the 1st quarter and labor costs rose as companies boosted employment to meet rising demand.  The measure of employee output per hour increased at a 1.8 percent annual rate after a 2.9 percent gain in the prior three months, revised figures from the Labor Department showed today in Washington, D.C.  Employee expenses climbed at a 0.7 percent rate after dropping 2.8 percent the prior quarter.

Productivity measures the amount of output per hour of work.  A slowdown in growth is bad for the economy if it persists.  But it can be good in the short term when unemployment is high because it can mean that companies are reaching the limits on how much extra output they can get from their existing work forces.  Output grew 3.9 percent in 2010, the biggest increase since 2002.  But many economists believe it will slow to 50 percent of that rate this year.  The expectation is that companies will hire new workers to further boost output.