Three snapshots for Friday
The correlation between individual country equity indices is rising again:
U.S. consumer spending jumps in February but income growth tepid.
Apple vs. RIM market value:
Three snapshots for Friday
One Apple chart that has been going down for 10 years is its forward P/E ratio:
Rising gasoline prices push up American’s inflation expectations for the next year:
Currency moves this year:
from MacroScope:
The iPod – the iCon of Chinese capitalism
Walking past Apple's sleek shop along London's Regent Street on Sunday, my wife asked me what I wanted for Father's Day.
"An iPad?" I ventured, half-jokingly.
"Are you sure you want one? Don't you care how they're made?" came her disapproving reply.
She was, of course, referring to the rash of suicides among Chinese workers at Foxconn, the Taiwanese manufacturer of Apple's much desired iPads and iPhones.
The deaths prompted the company to raise salaries and cut working hours but lingering concerns over conditions for its over 1 million workers in China were underscored by a plant explosion last month that killed at least 3 people.
Workers like those who live and work in Foxconn's sprawling Chinese facilities have long been the backbone of the country's vast manufacturing sector which churns out a torrent of consumer goods for export.
But the recent labour unrest that has erupted in parts of China suggests that this low-cost export-fuelled growth model may be wheezing towards its expiry date.
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Apple is working with Foxconn to prevent more worker suicides, including auditing the Chinese plants of its supplier to ensure conditions comply with its standards.
The point of my blog is that the iPod is an interesting prism through which to view China’ economy and gauge its shift in emphasis from manufacturing and exports to domestic consumption.
At first glance, the iPod encapsulates China’s manufacturing prowess. It is able to assemble very sophisticated products at a cost that is low enough to attract global companies. So much so that these Made-in-China iPods and iPad contribute to the trade surplus in China’s favour against the U.S.
But a closer examination of the iPod story also reveals the limitations of the Chinese model. The country remains far behind in innovation and doesn’t own the intellectual property behind many of the products it exports.
A University of California study, for instance, found that the iPod accounted for almost 41,000 jobs worldwide in 2006, of which only 30 jobs were in manufacturing in the US.
But more than two thirds of all the wages paid to workers in the iPod value chain were estimated to have been paid to US workers.
Who’s next for the Dow?
Arzu Cevik, director at Thomson Reuters Strategic Research, writes:
“With Citi shares trading below $1, the first time since 1970 that a “penny stock” traded on the Dow Jones Industrial Average, it is widely expected that it will be removed from the index.
“The company was added to the Dow in 1997 when it was still known as Travelers, and the last company to be removed from the Dow was AIG last September (when its stock hovered above $1) and was replaced by Kraft Foods.
“It’s also expected that General Motors may be removed from the Dow. GM shares are trading slightly above $1 and there’s speculation it may be headed toward bankruptcy.
“There are other stocks in the Dow that are now a part of Wall Street’s Dollar Menu. In fact, there are currently five Dow stocks trading in the single digit range.
“Who will take their place in the Dow? Mostly likely, another company whose stock is faring better or relatively better in this recessionary environment.
“There aren’t too many of those but if I had to guess, I’d say it would have to be a company with a strong brand name and one that is viewed as influential. Also, one whose shares aren’t trading in the single digits.
The cover story of the latest Barron’s declares optimistically “Sure, stocks could slide much further — but they probably won’t. By most measures, they are downright cheap.”The Stock Research Portal comments that the article contains a “fatal flaw”: “the heavy reliance many economists, analysts, others place on historic trends and their application to current day prospects. Right or not, I believe that after the turn of the century the world has become a quite different place.”Via Stock Research Portal (www.stockresearchportal.com)
One Minute Manager
One minute, one manager. An occasional word about what to expect from the economy and financial markets. Today is Giles Keating, global head of research at Credit Suisse Private Bank.
It is time, Keating says, to prepare for a bottoming out of the global economic downturn.
Is there a gadget to avoid recession?
Some investors reckon the U.S. economy is in recession and undergoing a W-shaped pattern of growth — that is decline, temporary recovery, decline again, then rebound.
Fortis Investments is one such believer and is telling its clients that they are currently in the second down phase. That implies a rebound is coming, but Fortis is not ready to say when. Not anytime soon, is all it suggests.
One quick gauge of a country’s economy, meanwhile, is to drop into a popular shopping area and see what people are doing. Purely subjectively, a visit last week to two malls in the United States — in Maryland and Virginia — suggested things are pretty bad.
Fewer shoppers than usual, very few carrying actual purchases — the bag test — and sales on at just about every shop.
One exception: traffic at one Apple Store was heavy enough that customers wanting to enter were queueing behind a rope outside.
Perhaps gadgets will save the world?
(Reuters photo: waiting in line to buy Apple’s new iPhone 3G a day before it goes on sale in New York, July 10, 2008)
