Monday, February 15, 2016

Buybacks Could Be the Stock Market Savior This Year


Dividend Issuance/Share Buybacks – Post-Financial Crisis

Companies may have to fend for themselves considering the gradually bleak in stock market returns. In 2016, retail investors have been bailing on stocks and pulling money from the domestic equity funds each week due to which the S&P 500 was down by 8% year till date before the market plunge on Monday.

This was a bad indication for a market that historically takes its full year hint from how it transpired earlier and companies seemed to be willing to step into the emptiness. Dividend issuance together with share buybacks were the major tailwind for the post-financial crisis bull market that would turn 7 years old in a month had it had managed to hang on through the present volatility.

Short historical valuations accompanied with cheap money had given rise to pushing companies to return trillions to the investors. Due to the blackout period over for buyback declarations, Wall Street is hoping for big things. Chief U.S. equity strategist at Goldman Sach, David Kostin, had mentioned in a note his team had sent to client recently, that early indication are that 2016 buybacks are `on pace to be one of the fastest starts on record’.

Companies Expressed Continued Commitment to Buybacks

So far the total announcement was $63 billion scarcely a month into the year, with Kostin considering that it is just the beginning. He comments that companies have usually expressed a continued commitment to buybacks, aware that the market weakness could be a reason for increase instead of narrowing their purchases.

 In 2015, buybacks had amounted to $724 billion, a year which had ranked second only to 2007 in total volume as per market data research firm TrimTabs. The year set a second record for several corporate money, utilised for buybacks as well cash takeovers at $1.41 trillion.A comparison with 2007 would not essentially promise well for the market taking into consideration that was the year wherein the house-led bull market started to crash.

However, the conditions of the market were different, where optimism was running high and equity allocations almost at 70% in 2007. Investors were cautious of the stock market with Goldman’s indicator putting sentiment at 2 on a scale of 1 to 100. Kostin had informed that it indicates a likely market rise of 4% in the following month depending on corporate buyers filling the void left by retail investors.

Management Optimism Important to Market

He further added that management optimism was important to the market since corporates tend to represent the main source of demand for U.S. equities beyond the present environment and the increase in buyback activity after 4Q earning season usually matches with the out performance of large stocks of buyback.

Classifying single companies, he said tend to poise for significant buybacks comprising of Gilead Sciences that specified $12 billion and 3M with $10 billion. Besides this, GE is composed for a hugs cash deployment for an unspecified mix of buybacks as well as dividends.

On the other hand Apple, Microsoft and Qualcomm too have substantial cash on hand to give on buybacks. Though the flow in buybacks has matched the sharp run-up in stock prices, investing money especially towards companies which tend to use their cash in that way has faced mixed success.

Thursday, February 4, 2016

After the sell off, stocks may actually be cheap


Sell Off Wall Street - A Silver Lining

Wall Street is finally breathing a sigh of relief after the S&P 500 Index managed to hold on to its first weekly gain of the year. One prominent market watchers had commented that inspite of signs of strength; stocks are still in store for a thundering reset. The ruthless sell off Wall Street had faced during the last few weeks could have a silver lining.

 According to FactSet, the S&P 500 Index is presently trading at around 15 times the earnings; analysts tend to expect constituents companies to post over the next year. This reading is known as `forward P/E on the popular measure of valuation which is compared to a 15 year average forward P/E ratio of 15.7. The conclusion collected from historical comparison is based on the timeframe taken into account.

 It is worth observing, in this case that the current valuation level tends to represent the premium to the average of 14.3 observed over the past five and ten years periods. Since the firm in the meantime is probably using various earnings estimates, IQ of S&P Capital current forward valuation number is 15.7 though they also observed that was under the 15 year average.

Broad Market Trading in Abyss

David Stockman who was the former OMB Director under President Ronal Reagan, is of the opinion that the broad market has been trading in the abyss after breaking beyond 1,870 in 2014, since then with a meagre one percent return. He had commented that they had been there for 700 days and had something like 35 attempts at rallies where all have failed for the `four no’s’. For him the four no’s comprise of a combination of no escape velocity, no earnings growth, no dry powder from the central bank and no reflation.Accompanied together, it leads him to the belief that the U.S. economy seems to be on the point of a full blown recession.

He further adds that they are getting to a point where the chickens are coming home to roost and there is no help from the central banks and that is why these rallies seem to get weaker as well as shorter. He is of the belief that the overflow of easy money from central banks all across the world has shaped a credit crisis which is so severe that it could probable take years to come out of what it has created.

High Powered Money – Enormous Expansion of Credit

Market watchers have pointed out a stunning $21 trillion collective balance sheet built up all around the globe, up from 2.1 trillion only 20 years back. He has said that this is high powered money which has resulted in an enormous expansion of credit as well as financial valuation bubble.

Stockman has observed that the speedy increase of credit has caused debt all over the world of over $225 trillion and has mentioned that they `are at peak debt’. Stockman, at this point considers that the hands of the Fed could be tied up after being on zero interest rates for almost a decade. There is nowhere to go but negative and it is time to get out of the market completely.

The S&P 500 has been progressively in correction territory in 2016and the large-cap index closed the week at around 11% from its 52 week high. However Stockman is of the opinion that it could plunge another 30% from its present trading which takes it back to levels not envisaged since 2012.

3 Investments You Must Make For Your Restaurant

When you own a restaurant, your focus is on product quality and customer service. That means that you are sure to keep essential equipment and materials around that help you to serve your customers better. Instead of hoping that things go smoothly from day to day, you should invest in a few little business tools that will allow you to maintain your level of service, and protect your business at the same time.

Liability Insurance

Responsible business owners have liability insurance to protect their businesses in case something were to happen. But when you run a customer service business like a restaurant, you can never anticipate what may happen on a daily basis. While it is financially smart to get the basic liability insurance you need to satisfy legal requirements, you should consider getting extra liability insurance for the sake of your business and your customers. Additional liability insurance will give you peace of mind when the weather creates slip and fall hazards on your sidewalks, or when a promotion you try goes bad and people get hurt.

Critical Spare Parts

Most restaurants keep spare parts scattered here and there throughout the building, just in case something goes wrong. But what would you do if your main oven went down and you did not have the part you needed to bring it back up to speed again? You could go to a parts website and get to the section that says "click here for overnight service," but you are still losing out on an entire day's worth of business.

To keep your restaurant going, you need to do a critical spare parts assessment and then keep at least one of those spare parts on hand at all times. This requires an extra financial investment on your part, but the payoff comes when having these parts available prevents you from losing thousands of dollars in business in just one night.

Power Generators

While it is unrealistic to expect to be able to power a whole night's worth of business on a single generator, it is possible to serve the customers you have to maintain your high level of service. When the power goes out, most people expect a restaurant to shut down and send customers home. But when your restaurant can finish serving meals that have been ordered before shutting down due to a power outage, then that enhances the restaurant's reputation.

Part of offering excellent service is being prepared for just about anything. When you invest in necessary services and equipment for your restaurant, then you will enhance your reputation as a reliable and top-notch business.

How Convenient Is A VoIP System?


The growth in home VoIP systems has been significant, and it has reached the point where people are starting to compare land lines with VoIP services. The broad amount of service providers has helped to give consumers choices, and has encouraged a steady stream of technological innovations. But should people really search out the cheapest VoIP rates as an alternative to land lines, or are land lines still the way to go?

VoIP Systems Are Scalable

If you want to add a line or add features to your VoIP system, then the process is extremely simple. With a land line, adding a line can take a while and it can also be quite expensive. But when you decide that your teenager should have their own phone line so that they stop tying up the home phone for everyone else, the process of adding that line with a VoIP system is very simple.

VoIP Systems Are Portable

Some land line services allow customers to check voicemail remotely, but the process can often be long and frustrating. With a VoIP service, voicemail can be checked quickly online. You can even set up a reminder that sends you and email each time you get a voicemail so that you can check your messages quickly when you are not home. You can also check your billing or any other aspect of your VoIP system easily and quickly online.

International Calling Is Available

One of the biggest advantages of having a VoIP service over a standard land line is that most VoIP service providers give you extremely inexpensive access to international calling. Because the Internet makes it easier and cheaper to connect international calls, the VoIP service providers can keep your costs down and allow you to make international calls without the fear of an escalating bill.

Managing Your Features Is Easy

It can be difficult to manage features such as call waiting and call forwarding on a land line service. But because everything about a VoIP service is done on the Internet, managing these features becomes as simple as clicking a button.

The rapid growth of VoIP phone services has a lot to do with how much easier these services are to use than a land line. Not only can you save money with a VoIP service, but you can save time and aggravation as well.

Monday, February 1, 2016

Amnesty International report links batteries used in phones to child labour in Congo

Child labour

Child Labour in Mines – Extract Material for Lithium-ion Batteries

Children as young as seven are being exploited by crooked mining companies in order to extract material utilised in making lithium-ion batteries which power the smartphones and tablets, according to Amnesty International and Afrewatch. The report found that around 40,000 children worked in mines all over the Democratic Republic of Congo – DRC in 2014 for 12 hours and were paid between one and two US dollar per day.

Authors mentioned that the major electronic companies of the world like Apple, Samsung and Sony have failed to stop this. Their report, state that `this is what we die for: Human rights abuses in the Democratic Republic of the Congo power the global trade in cobalt. The agencies inform they were able to connect the sale of the material utilised in the making of the batteries, cobalt, to mines, which used child labour.

Mark Dummett, Amnesty International business and human rights researcher had commented that `the beautiful shop displays and marketing of state of the art technologies are obvious to the children carrying bags of rock and miners in narrow man-made tunnels with a risk of permanent lung damage.

No Safety Gears Provided

Millions of people appreciate the benefit of new technologies but seldom tend to ask how they are made. It is high time that the big brands take some kind of responsibility for the mining of raw materials which makes their profitable products.

Over half of the cobalt of the world is from the Democratic Republic of Congo with about 20% of which is extracted utilising a practice called artisanal mining wherein the workers seem to use their bare hands or basic tools like chisels in order to mine materials. No safety gears like hats, protective clothing or masks have been provided for them.

On examining the investor documents of Huayon Cobalt, the group found that after the companies had processed the material, it was sold to three battery component manufacturers, namely Ningbo Shanshan and Tianjin Bamo from China and L&F Materials from South Korea.The manufacturers in turn sold the material to battery makers that tend to supply technology and car companies

Several Accidents Go Unrecorded

Sixteen multinationals had been contacted by Amnesty International which was listed as direct or indirect customers of battery manufacturers mentioned in the report which sourced processed ore from Huayon Cobalt.

They included Ahong, Apple, BYD, Daimler, Dell, HP, Huawei, Inventec, together with Lenovo, LG, Microsoft, Samsung, Sony, Vodafone Volkswagen and ZTE. Mr Dumment had informed that other than the use of child labour and the awful conditions put up by the workers, he found it shocking that the big multinationals who have combined global profits of about $125 billion had failed to have systems wherein they could trace cobalt.

Dummet mentioned that when Amnesty had contacted the companies, they were told that they had their policies in place regarding human rights abuses and use of child labour. However when pressed further regarding the cobalt they were unable to provide specifications According to the report, around 80 artisanal miners had died in southern DRC during September 2014 and December 2015. But the true figure is not known since several accidents tend to go unrecorded with the bodies left buried in the rubble.

Mr Dummet had stated that both organisations are coordinating with the multinational to investigate where their cobalt was extracted from and to be more transparent regarding their suppliers.