Nature and Urban Life: Absolute Write Blog Chain June 2009

This is the time for an Absolute Write Blog Chain. It is a blog chain without any theme. So, you can expect some dramatic change in tone and topic as the blog chain progresses.

I am starting June blog chain with this entry. The last few days were full of stress for me. It is very hot in my country. Monsoon Rain was supposed to come last week and it has not come yet. 2 weeks ago, I had to take my wife to a hospital because she became sick from summer heat. Today, she again felt weak and I became afraid. Fortunately, I did not need to take her to the hospital again. Even I am not well these days. I live in a city with more than 10 million people and like any urban dweller; I have lost touch with nature. Air conditioner is out of my ability and electric fan is the best thing that I can afford. This problem has made me think about nature.

I am now 34 years old and when I was 10-11 years old, there were just half the amount of people in my city. There were many more trees and nature summer was more moderate. I know that many people in Europe and America like to believe that there is nothing called global warming. Well, I can tell you from my experience that it is real. Climate has really changed a lot in the last 2 decades. It is true that the people in my own society and country have a lot of contribution in global warming but at the same time, too much consumption of resources in the rich Western countries is the main villain behind the changing nature of global climate.

In USA, I think that there are more than 700 cars against 1,000 persons. In my own country, it is not even 5 cars against 1000 persons. I have no complain against US consumers. They work hard and they enjoy life with their hard earned money. Not only that, we the people living in the third world countries, have our own fair share of bad activities to harm nature.

All I know is that we do not live in an isolated world any more. I wish that our political leaders and decision makers could come to this realization.

Next in blog chain is Fokker Aeroplanbau in his blog: I'm Always Right, Far Right

I wonder what he will say about it.

The participating blogs in June 2009 blog chain are:

Hobby Economist
I'm Always Right, Far Right
Far Seeing Fairy Tales
Benjamin Solah, Marxist Horror Writer
Writer Chick Talks
Delirious
Beyond Tourism: Florida's Yesteryear

Four-Lettered Words
Random Writerly Thoughts
Expressive World
Tika Newman
BillWardWriter.com
Made of Carbon

President Barack Obama’s financial reform: Will it change people?

On June 20, 2009, the U.S. President Barack Obama in his weekly radio and Internet address, said that he is going to work on restructuring the country’s financial system. In his speech President Obama said that he would make sure that government gain more oversight on the business activities of the country’s top financial institutions. President Obama also proposed to form “Consumer Financial Protection Agency” that will make sure that banks and financial institutions clear the fine points to consumers before they take any kind of loan.

The Financial Regulatory Reform:

On June 17, 2009, President Barack Obama unveiled his regulatory reform plan. The proposals are now submitted to the congress. The reform if implemented would reverse all the policies set by President Ronald Reagan in the 1980s. Here are some of the major points:

• More authority to the Federal Reserve over major financial institutions.
• More power to the Federal Deposit Insurance Corporation.
• Tap into the “shadow system” of the financial institutions to stop their deceptive practices and protect consumers.
• Creation of a watchdog agency called “Consumer Financial Protection Agency” to oversee the interest of the consumers. The agency would make sure that
• banks and credit card companies become more clear when they sell their products to their consumers.

Opposing the reform plan:

Banking officials are saying that the reform plan will increase the rich of the government and put them in the middle of the business which is not a very good thing.

In support of the reform plan:

There are many people who are also supporting the reform plan. They supporters are saying that the new reform plan would give a boost to the banking and financial sector of the country. In the light of the recent economic crisis, people have lost their faith on banks and financial institutions. The bank officials place their interest first rather than consumers interest. In order to get more money, they even gave loans to people with poor credit record or people who does not have the capability to clear their loans and it caused a serious crisis.

At this very moment what is most necessary is confidence which the consumers do not have any confidence on rating agencies. A recent survey revealed that only 9 out every 100 people in the U.S and the U.K trust their financial institutions. What President Barack Obama is trying to restore the faith of the investors and consumers through his financial reformation.

American people should accept the reality:

My view is that it is time for the U.S. people also become conscious about their financial condition and understand their limitations. There are many people who earn small amount of money and have no job security. Yet, they took loans from bank to buy house and cars and other expensive items. This is not a very good practice. I understand that it is a dream to have your own house or car but for some people it is too much to handle and may not come true but life does not end if you do not own a house or your own car.

Related articles:

The New York Times

The Washington Post

Associated Press

Los Angeles Times

The Huffington Post

Six Flags Inc.: Chapter 11 bankruptcy and restructuring

On June 13, 2009, Six Flags Inc., with unianimous support from its lenders, filed for Chapter 11 bankruptcy protection. The New York- based company is the largest theme park company in the world. It operates theme parks in the U.S., Canada and Mexico. The company was already under $2.4 billion dollar when its current management team took over the company. Mark Shapiro, chief executive of Six Flags Inc. said that the company would not be able to sustain such huge debt load in the time of economic recession. Reuters reports:

The plan will result in a deleveraging of the company's balance sheet by about $1.8 billion, as well as the elimination of more than $300 million in preferred stock obligations.

More than three years ago, Daniel M. Snyder, owner of the Washington Redskins American football team, took over Six Flags Inc. Though a successful businessman himself, his management team could not make the company profitable. In the first quarter of the current fiscal year, the company reported a lost worth $146.3 million. After getting bankruptcy court approval, the company will go for restructuring.

Bleak future for American Airlines Industry

Economic recession has hit the airlines industry of the U.S. pretty badly. Due to poor passenger turnover, air lines are now shedding off jobs to survive the recession. In the latest jobloss case, American Airlines, one of the top Airlines of the U.S. will eliminate 1600 jobs. On the other hand, Delta Airlines Inc., another major American Airlines is going to reduce its employees’ salary and will reassess its “staffing needs.” The company ordered its 400 flight attendants to take leaves or they would be laid off. Bloomberg reports:

Delta, the world’s largest airline, will slash available seats as much as 4 percentage points more than planned, for a cutback of 10 percent from 2008 levels, Chief Executive Officer Richard Anderson told employees. American, the second-biggest carrier, said it would shrink flying by 1 percentage point more than projected, to 7.5 percent.

Due to recession, number of people traveling by plane dropped significantly. Moreover, many business executives also stopped traveling as companies are trying to reduce their expenses. In order to attract customers, airlines are reducing air fares unless there is a major change in the country’s economic outlook there would be no major change in the business.

BlackRock Inc. will take over Barclays Global Investment Unit for $13.5 billion

Famous American Investment management firm, BlackRock Inc., will buy the investment unit of Barclays PLC, another major European financial firm, for $13.5 billion. This merger would become one of the largest investment firms in the world with assets worth $2.7 trillion.

The newly formed company named BlackRock Global Investors (BRGI), will have a market value of more than $34 billion. In a statement issued by BlackRock Inc., the company said that it would pay $6.6 billion in cash and rest will be paid in stock for Barclays Global Investors. In the newly formed company, Barclays will have a 19.9% stake. The combined company will raise funds worth $2.8 billion through equity sales and borrow $2 billion from Barclays and other banks. Laurence Fink, Chairman and CEO, BlackRock Inc. said that this would widen the range of products offered by the companies.

John Varley, CEO, Barclays and Robert Diamond, President, Barclays’ will join the board of directors of BRGI. Blake Grossman, CEO, Barclays Investment Unit, will be vice chairman of BRGI.

Related articles:

Bloomberg

The U.S. share market overview June 11 2009.

On June 11, 2009, the U.S. sharemarket observed an upward trend following a decrease in the number of jobless claims and rise in retail sales in May. According to the report of The U.S. Department of Labor, jobless claims fell by 24,000 to 601,000 last week. Though the number is quite high, it is lower compared to the January figure. On the contrary, retail sales rose 0.5% in May 2009 reporting the third monthly gain this year. Here are some of the highlights of the stock market:

• Shares of Bank of America Corporation advanced 6.2% to $12.72.

• Shares of Fifth Third Bancorp, the biggest bank of the state of Ohio, rose 4.9% to $7.70. Today, Goldman Sachs Group Inc. upgraded the bank’s share to “buy” from “neutral.”

• Share prices of Regions Financial Corporation increased 6.3% to $4.25 marking the biggest gain in S&P 500. Share of the banks was also upgraded by Goldman Sachs Group.

• Shares of Chevron Corporation advanced 0.7% to $74.33.

• Share prices of Microsoft Corporation gained 1.1% to $22.80.

• The Standard & Poor’s 500 Index increased 0.9% to 947.66 at 11:39 at the New York Stock Exchange. In March, the index hit a “12-year low” and rose 40% since then.

• Dow Jones advanced by 67.19 points to 8,806.21.

• Price of crude oil rose to $72.64 per barrel in New York, the highest in the last seven months. This also boosted the share prices of the energy companies. International Energy Agency (IEA), forecasted a rise in the demand of crude oil around the world for the first time since August 2008. In May, China bought 3.9 million barrels a day.

• Yields on ten year treasury bonds went down 3.93%.

Related article:

Bloomberg

Arcandor AG and Metro AG of Germany are going for merger

On June 7, 2009, Metro AG, a renowned retail chain in Germany, reported to have started discussion with Arcandor AG, a reputed retail and tourism company. The two companies are going to merge their departmental stores business to survive the economic recession.

Arcandor AG and Metro AG are owners of the two largest department store chains in Germany. Metro AG owns the Kaufhof chain while Arcandor AG is the owner of Karstadt department stores, most of which are situated in buildings of a real estate company, owned by Goldman Sachs. Chairmen of the three companies- Karl Gerhard Eick of Arcandor AG, Eckhard Cordes of Metro AG and Alexander Dibelius of Goldman Sachs in Germany have agreed to start necessary negotiations in the coming week.

Arcandor, which is on the verge or bankruptcy, asked for $610 million “in government credit guarantees.” However, many politicians are against this guarantee as they believe that the company’s failure is actually “management failure.” Business Week reports:

Chancellor Angela Merkel has said that Arcandor must seek a private solution to chronic problems that include too broad a portfolio and falling consumer demand.

"We naturally want to make every possible effort to secure an economic solution," Merkel said Sunday in Berlin.

On the other hand, Gerd Koslowski, spokesman, Arcandor said that his company could fulfill the government’s credit requirements after the alliance between the companies department stores business is formed.

Chrysler LLC sales: Whose side Richard Mourdock is on?

Despite being refused by appeal courts two times, Indiana Pension Funds, headed by Richard Mourdock, is pressing on for stay in the Chrysler LLC sales. On June 5, 2009, US appeals court gave Chrysler the green signal to continue its sales to Italian carmaker Fiat S.p.A. The newly formed company known as the Chrysler Group will be jointly owned by the U.S. government, an autoworker's union retiree fund and the Italian Automaker Fiat. The deal will be finalized within June 8, 2009, if the Supreme Court does not intervene.

On June 6, 2009, the group of Indian pension funds filed another emergency appeal with the Supreme Court Justice Ruth Bader Ginsburg. CNN Money.com reports:

She could act on her own or refer the case to the remainder of the court. A stay from the full court would require a majority of the court's nine members.

"Absent a stay, the Court will be deprived of the opportunity to decide critical, nationally significant legal issues relating to management of the economy by the United States Government," the funds said in their stay application.

On May 31, 2009, Indiana State Treasurer Richard Mourdock, on behalf of three pension funds (Indian teachers, state police, and “Major Moves” pension fund), appealed against the ruling of the Federal Bankruptcy court that allowed Chrysler LLC to sell the companies top assets. The three pension funds bought shares worth $42 million which is less than 1% of the total debt of Chrysler LLC. Mourdock’s side of argument is that, as secured creditors, the funds deserves better against unsecured creditors like the Fiat. He said that for the first time in the history of USA unsecured creditors are getting more value in bankruptcy than secured creditors. The funds paid $ 0.43 per share and getting $0.29 cents which results into a $6 million loss for the state of Indiana and this is not fair. If the sales of Chrysler LLC is not finished by 4 p.m. within June 8, 2009 then the deal will be expired.

From my point of view, this whole legal fuss forwarded by Richard Mourdock seems to me like an effort to upgrade his public image so that he could run for governor. At least, the creditors are getting something out of this restructuring. If the sales is not finished, they would not get anything. Mr. Mourdock must remember that “Something is better than Nothing.”

Mattel Corp. agrees to pay $2.3 million for selling toys containing excessive lead

Mattel Corporation, the famous American toy maker, will pay civil penalties worth $2.3 million for violating the “federal lead paint ban.” According to Consumer Product Safety Commission (CPSC) Mattel Corp. and its Fisher-Price pre-school division imported and sold children toys that contains harmful lead beyond the permitted level and violated 30 year old federal law. Both companies agreed to the penalty but they said that they did not violate any laws. CNN Money.com reports:

The Consumer Product Safety Commission said the fine against the No. 1 toymaker and its Fisher-Price pre-school division was the highest ever for the agency's regulated product violations and the third largest in its history.

"This penalty should serve notice to toy makers that CPSC is committed to the safety of children, to reducing their exposure to lead, and to the implementation of the Consumer Product Safety Improvement Act," CPSC acting chairman Thomas Moore, said in a statement.

In 1978, a federal law was passed which does not allow more than 0.06% lead “by weight in paints or surface coatings.” Between September 2006 and August 2007, Mattel Toys imported upto 900,000 toys including the famous “Sarge” toy car and large number of Barbies that does not comply with the Consumer Product Safety Act.

Target Corporation strikes at the heart of Wal-Mart Inc.

In March 2009, Target Corporation, another top American retail chain, and one of the major rivals of Wal-Mart, opened their new retail store in Arkansas which came as a major surprise to many people. Arkansas is considered to be the “heart land” of Wal-Mart Inc., the retail giant. The new Target retail store is seven minutes away from the first Wal-Mart Store built in 1962 and twenty minutes drive (without traffic) from the headquarters of Wal-Mart Inc. in Bentonville. The first question that came to many people’s mind was “Will Target be able to attract people in its store?” Well, after three months of operation, the answer is a big YES. The store is not only attracting ordinary shoppers but also Wal-Mart executives as well.

The new Target stroing is going strong on grocery sales compared to Wal-Mart which offers fresh foods. The grocery section of Target stretches over an area of 136,666 square feet and sales only “frozen, canned and packaged foods.” Still, shoppers like the store because it comes as a suitable alternative to them. Even Wal-Mart executives frequently visit the store.

At the end of the day, Target store manager Chuck Simmons admits of a mental pressure as they are operating on Wal-Mart’s turf and comparatively Wal-Mart store gets more shopper than their’s. The company posted a slump of 6.1% in its May sales and it predicts a “flat sale upto 3%” in its second quarter. At the end of the day, it is all a healthy competition and that is what we would like to see more.

Related articles:

CNN Money.com

Stock holders propose. Wal-Mart Stores Inc. disposes

On June 4, 2009, famous American retail chain, Wal-Mart Stores Inc., announced to create more than 22,000 in the current fiscal year through opening 1,300 new stores all over the U.S. The job positions include: Positions will include store management, pharmacists, human resources managers, customer service associates, cashiers and sales associates.

Despite economic recession, Wal-Mart stores did pretty well. In May 2009, the company announced an earning of $3 billion in the first quarter of the current fiscal year. Shares of the retail chain gained a dividend of 77 cents per share which is a penny more compared to its per-share-dividend of 2008. The overall revenue of the company decreased to $93.5 billion from 94.9 billion.

On June 5 2009, Wal-Mart is going to hold its annual stockholders meeting in Bud Walton Arena at the University of Arkansas. In the meeting, Wal-Mart administration is going to discuss six proposals submitted by its share holders. The proposals focus on providing equal opportunity to both men and women, performance based payment system, right to an advisory vote on executive compensation, preparing a semi-annual report on the company’s political contribution, ability to call special meetings and incentive payment in the form of stock options. Interestingly, Wal-Mart administration opposed the proposals. In the meeting, the share holders are also going to elect their new directors.

Related articles:

Phoenix Business Journal

GM and Chrysler LLC shades off dealers for the sake of survival

On June 3, 2009, at a Senate Commerce Committee hearing executives of the GM and Chrysler LLC said that the elimination of their dealers is a critical step for their survival. The two major American automakers went bankrupt and declared to eliminate more than 2,300 dealerships. This means an estimated 100,000 people will lose their jobs which forced the government to look into the matter.

In his testimony, Frederick A. Henderson, interim CEO of GM, said that his company had no choice but to sacrifice for the sake of a “stronger and more viable GM.” In his testimony, Jim Press, Chrysler President, said that in order for a successful merger with Fiat SpA, the company required a “quick turnaround of its dealer network.”

However, Senator John Rockfeller, chairman of the panel, was not satisfied with their explanation. He said that the companies, who received government bailout money and not helping their local dealers and customers, were doing wrong.

This move by the two auto companies shows failure of the Obama administration to protect US jobs. However, the government has to admit that only giving away money would not change the financial condition of the companies. I think, along with stimulus packages, the present American government should work on reforming their overall business and corporate sector to survive in the future.

Related articles:

Reuters

Large budget deficit is a major threat to long term financial stability of the U.S.

American government has offered a big stimulus package to revive the country’s economy but that stimulus will cause serious trouble in the long run. In his speech towards the House Budget Committee, Ben. S. Bernanke, Chairman, Federal Reserve, warned that the huge budget deficit poses a major threat to the country’s financial stability and policy makers have to start planning to restore “the fiscal balance.”

Yields on the ten year US Treasury bonds increased by 1 percentage points since the Federal Reserve announced to buy long term treasury bonds worth $300 billion. On June 2, 2009 the bonds yielded a return of 3.61% which came down to 3.54% on June 3, 2009. After Barack Obama became the President, the US government offered a stimulus package of $800 billion. It also tookover Fannie Mae and Freddie Mac which increased government spending.

House Majority Leader, Steny Hoyer also agreed with Bernanke and said that the house is going to pass a legislation to cut spending in one category. President Barack Obama promised to halve the budget deficit by the end of his term and even if he becomes successful, the government will continue with large deficit in future.

Related articles:

Bloomberg

US job loss will reach a new height

Though America is showing signs of recovery from the economic recession, gloom is still hanging over the job market. Famous computing and business firm, Automatic Data Processing, Inc. released its latest report on June 3, 2009, which says that US employers cut 5,32,000 jobs in May 2009. The company also revised its estimate of April 2009 job cuts from 4,91,000 to 5,45,000. The major cause behind such high job cuts is that employers are still taking necessary cost cutting measures. Here are some of the high lights of the report:

· Large business organizations cut 100,000 jobs.

· Medium business cut 2,23,000 jobs.

· Small business cut 2,0,9000 jobs.

· The “service-producing” sector declined by 2,65,000 positions.

· The “goods-producing” sector cut 267,000 jobs.

The US Dept of Labor is going to release its latest job report on June 5, 2009 and as per “analyst average estimate” the report will also show a figure around 5,20,000, a 9.2% increase against April 8.9%. The worst news is, despite economic recovery, American companies will reduce another one million jobs in the rest of the current year and by 2010, the jobless rate of the U.S will hit the peak of 9.5%-10%. It will be the highest since September 1983.

Related articles:

Reuters

Business Journal

GM Bankruptcy: Toughest Challenge for Barack Obama

The expected thing happened today- General Motors filed for bankruptcy. The company had no other option but to do so. I know that many people are wondering what went wrong for the company that has been for many years the largest employer in USA. The emergence of the company 101 years ago perhaps took place at the same time of America’s entrance in the global scene as the largest economy. The company has already received nearly $20 billion from the government and another $30 billion is supposed to come. In return, the US government will get roughly 60% of share. So, Obama government will be at the helm of this company for sometimes.

The plan is very simple- to cut cost, to shed off many workers, close some manufacturing plants and thus the company will become much smaller than it is now. Obama and his team think that a smaller but more efficient company will emerge and it will become profitable soon. If it happens then no problem. Obama will get all the praise and people will remember him as a great president for many years. However, many people are skeptical about the turn around of the fortune of this company and to be honest with you, I am one of them.

That is perhaps why, I feel some sympathy for President Obama. After all, economic recession did not start during his reign and the same goes for GM problems. He just inherited them from George Bush. It is a bit unfair that he Obama has to deal with both these two huge problems that have affected US economy in a very negative way. So, if the condition of GM worsens in the next few years then it may have serious political implication for his reelection bid in 2012. That is why, I feel that it is very important for Obama and his team to give this message to the people that the condition of General Motors is very bad and if it goes worse then they should not blamed unfairly. Instead, I would advise his PR team to focus on the fact that he did not try to avoid the issue. Rather, he accepted the challenge and tried to do something about it.