LyrArc Article Gist
The Iranian response to the tighter sanctions of the Trump administration are seen in this report from Tehran in the WSJ. The economic arm of the Revolutionary Corps that helps run the Iranian economy managing civil construction projects, oil projects, and commercial real estate, is now led not by a general from the Iraq-Iran war. The new head is Saeed Mohammed who has a PhD. in civil engineering and has managed civil construction projects. He hopes to use his company's resources to fill the void left by foreign investors complying with sanctions and withdrawing. The companies run by the new leader are run on management efficiency principles leaving behind the revolutionary fervour of the previous period. As CEO of Khatam Construction Base, 50 year old Saeed Mohammed plans to stabilize the economy and soften the harsh effects of the sanctions of the Trump administration on Iran. He plans to work with other private companies inside Iran to shore up the Iranian economy till the sanctions regime and the differences with the U.S. are settled. ...

LyrArc Article Gist
Tom Albanese of Australia's Rio Tinto resigns, ending a six year period at the company, after taking a $14 billion loss in Jan 2013. Of this $10-11 billion is for the failed Alcan Aluminium acquisition, and $3 billion for the acquisition of Riversdale Mining with coking coal assets in Mozambique. The Alcan Aluminium acquisition has resulted in $30 billion in wirtedowns for Rio Tinto including the latest writedown. Aluminium prices have declined 22% since 2007. The coking coal prices have declined 43% since 2011. Shipping coking coal down the Zambezi would require dredging the river and approvals, the coal is also of poor quality requiring additional processing. Sam Walsh who headed the iron operations since 2004 takes over as new CEO. Walsh has managed the large Pilbara iron ore projects on time and on budget. Earnings on the large iron ore projects have increased 15 times since 2004, with near doubling of production. Rio Tinto is the world's second largest iron ore producer. The focus of operations will now be on developing iron ore deposits to meet demand from China, India, Russia and the Middle East. A string of CEO's of commodity producers have resigned. Anglo American's CEO Cynthia Carroll resigned after investing in an iron ore project in Brazil in 2007 which cost $5.6 billion more than expected to develop. Going to remote regions of the world has increased risks for mining companies and overoptimistic projections have hurt the companies badly....

LyrArc Article Gist
VW AG China will recall cars with direct shift gearbox systems with quality issues, including acceleration problems. This follows a CCTV broadcast of consumer issues program 315 on World Consumer Rights Day. The 315 program has taken up quality issues of foreign brands in China, including Carrefours, McDonalds, Yum Brands, and Apple. The program shows the shift in China supported by the new government for greater attention to consumer issues. It acts as a signal to foreign manufacturers in China to provide the same quality and attention to detail in the Chinese market that is provided in their home markets. For companies such as VW that depend on the Chinese market for growth, and generally for German, Japanese and U.S. manufacturers that depend on export growth, this will be the new standard for the Chinese market. Companies are at greater risk of quality problems during periods of rapid expansion, such as that being experienced by VW as it ramps up to become the leading global automobile manufacturer. This is similiar to the situation Toyota faced in 2009 leading to recall problems in the U.S. and negative publicity....

LyrArc Article Gist
The situation in farms and orchards in the U.S. as growers face shortages of labor to pick vegetable and fruit produce. A special visa program provides U.S. farms for vegetable and fruit produce with agricultural workers from Mexico. In 2019 this program brought in about 268,000 agricultural workers from Mexico.This report looks at the effort of companies to ensure that agricultural workers are well taken care of. This includes delivery of groceries to limit trips to nearby towns, offering food trucks with prepared meals. Problems of overcrowded housing and lack of access to health care are problems that are being tackled. Some companies are reconfiguring field work for health safety, and funding overtime work at local health clinics.

LyrArc Article Gist
The restructuring underway at Pfizer. Experts view the cut in R&D budgets, when more new drugs are needed, with skepticism. Pfizer and other drug manufacturers believe they can make up for this by working closer with universities. Pfizer is reducing the size of its Groton, Connecticut R&D facility and is moving research operations closer to universities in Boston and Cambridge, England. R&D budgets will be cut 30%, from $9.4 billon to $6.5- $7 billion. The emphasis now is to develop a new model for drug development by focussing on a few promising areas, collaborate closely with universities, and fill gaps with acquisitions, as a more efficient way to develop new drugs. In this new approach the infant nutrition business, even with its high growth rates, did not fit in. Cash from the operations sold to Nestle will be used to make share buybacks and be returned to shareholders. Other drug companies from Novartis to Bristol Myers are trying this approach.

LyrArc Article Gist
Nouriel Roubini has proven correct on global financial issues. He said in an interview on the sidelines of a symposium in Malaysia, that China needs to revalue its currency for its own sake. China will see a growth collapse in the next 2-3 years if it fails to do so. His point is that China can still maintain growth by shifting to domestic consumption and less infrastructure spending and exports. In his view growth should not be affected if China exports less and consumes more. He points to the decrease in consumption as a share of GDP from 45% to 36% in the last ten years- this ratio is 70% in the USA. A cheap yuan keeps foreign goods unaffordable and protects state owned companies which also get cheap credit, as keeping the yuan low requires China to keep interest rates artificially low. What this does is make a massive transfer of income from the household sector to the state owned companies, just at the time when China needs to do the very opposite of this. And compounding the problem is that the 25% of China's GDP that is made up of retained earnings of mostly state owned companies, goes into real estate and production facilities. See the link to David Barboza in the New York Times who points to the wasteful spending and real estate speculation by state owned companies. Roubini cites the automobile sector where capacity has doubled in the last year to 20 million, when the domestic market increased by 50% to 10 million vehicles. The stimulus only increased the effect of surplus capacity and misallocation of investment, with highways to nowhere and brand new airports that are three quarters empty. The Chinese leadership is beginning to grasp this, but the state owned companies and other interests who benefit fromm the old model, may make it difficult to reverse the trends. A lot is at stake in this, as it affects the U.S., as well as countries dependent on China's imports such as Australia, Canada, Brazil and Germany. ...

LyrArc Article Gist
Pearlstein lists the names of insider investors for Facebook- Peter Theiel and Founders Fund, Jim Breyer and Accel Partners, Greylock Partners, Microsoft, Li-Ka-shing, Bono and Elevation Partners, Alisher Usmanov and DSL. For full disclosure he states Washington Post Co. chairman, Donald Graham, is on the board of Directors of Facebook. Venture capitalists are leveraging their position in Facebook to get new investors, share prices of companies involved are up. Goldman benefits by the $60 millon for placing client money in Facebook, a cut of 5% from any profit they earn, and the hundreds of millions of dollars from being a lead underwriter for Facebook's IPO. What all this does is create the conditions for a bubble for internet stocks similiar to the bubble in late 1990's, with insiders reaping most of the benefits and the public taking on most of the risk as the internet stock loses its dominant position with the entry of new technologies and competitors in the market or a change in consumer preferences. As was evident in the earlier bubble this is not hard to create. Some of these bubbles are in fact already taking place for Chinese internet stocks on US stock exchanges, with investigation staking place into accounting practices of some of these companies. With the financial electronic media and analysts doing their part in the hype and sell such a bubble is underway, just when the debt burdened US middle class can ill-afford any losses that may take place. ...

LyrArc Article Gist
Japan has accomplished a remarkable transformation of its workforce and its economy even as the working age population is declining. For years Japan was seen as a stagnant economy with a rapidly aging population. In recent years Japan has shown how a change in policy can work. Since 2012 working age population declined by 4.7 million, yet the number of people working increased by 4.4 million. The proportion of the population in the workforce rose sharply since 2012. To do this Japan turned to three underutilized parts of its workforce and population- the elderly, women and new immigrants. Japan has pursued an active policy of reviving the economy by bringing women into the workforce and breaking taboos on new immigrants. In 2004 Japan raised retirement age from 60 to 65, and then made it mandatory for companies to raise or abolish the retirement age, or introduce a system for re-employing workers who retire. This has changed Japan a lot with Japanese men working well into their 60's and 70's. In the west coast city of Kanagawa which now has a bullet train to Tokyo, out migration was a big problem that added to a declining workforce. The head of Ohara, a family owned company that makes desserts tried a novel method of advertising to seniors in apartment blocks and starting attracting seniors to fill worker shortages. It found that seniors came to work on time, performed even tedious tasks, and brought a great deal of experience. Since then the regional government has started programs to get more retirees and women into the workforce. The special programs teach small companies to adapt to the needs of retiree workers who can work in shorter shifts of few hours and do less physical jobs. Women need predictable hours to pickup children from school and shorter work weeks, for which the regional government program helps companies adapt by sending in specialists to guide the companies. As a result female participation in the workforce, for very long a big handicap is no longer so. Female participation has jumped to 63%, higher even than that in the OECD where the average is 62 years.  Japanese women had a M curve that meant they worked most in their 20's. less in the 30's with children, and more in the 50's. First the government tried to correct this with extended parental leave, increased childcare, and rewarding companies with good work-life balance. Then in 2009 the effort accelerated with employers required to offer 6 hour days if a worker asked for this. Under prime minister Abe's "womenomics" effort child care was significantly expanded- by 2015 Tokyo went from 28 to 38 spots open for every 100 two year olds. Alongside these efforts the Abe government tried to get companies to rethink their assumptions about quantity of work and overtime as productive effort. One could work shorter hours and be productive, and the old notions were seen as resulting in lower productivity. As fathers with parental leave took on more responsibility the changes transformed the attitudes for women at work. Most remarkable is the quiet change in immigration policy. The government allowed foreign construction workers to address shortages for work on the 2020 Olympics. It introduced a 3-5 year visas program for nursing care workers. Two new categories of visas will add 340,000 additional blue collar workers over next 5 years. The total foreign born workers in Japan doubled from 2012 to 2017 to 1.3 million. ...

LyrArc Article Gist
What Taiwan Semiconductor Manufacturing Company is learning from its effort to build chip plans in Phoenix, Arizona, is shown here by John Liu in NYT report. Different cultural practices about work exist between Taiwan and the US and both sides are learning to adapt to the new situation. These Chip plants are part of the effort of the efforts of the Biden administration to have Taiwanese and South Korean companies to invest in America. Following this learning curve the chip manufacturing plants will go into production in 2025.

LyrArc Article Gist
Classic DJT letter to Japan. WSJ annotates the letter but its annotation does not say that Japan has used the relationship with the US to its advantage, putting the US companies and industries at a serious disadvantage since 1970's. US Trade Representative under DJT first term 2016-2020 was Robert Lighthizer. Lighthizer was Deputy Trade Representative under Reagan in the 1980's negotiating with a Japan that would concede little. 2024 USTR Jamieson Greer was Deputy Trade Representative under Lighthizer. The Letter starts setting the tone that we have borne Japan's unwillingness to negotiate fairly with patience, ends stating we are ready to act. "It is a Great Honor for me to send you this letter in that it demonstrates the strength and commitment of our Trading Relationship, and the fact that the United States of America has agreed to continue working with Japan, despite having a significant Trade Deficit with your great Country." "We have had years to discuss our Trading Relationship with Japan, and have concluded that we must move away ....Our relationship has been, unfortunately, far from Reciprocal...Goods transshipped to evade a higher Tariff....If for any reason you decide to raise your Tariffs..." ...

LyrArc Article Gist
The Global Green Credit Initiative is launched by the UAE's Sheikh Mohamed Bin Zayed, with Narendra Modi of India, Ulf Kristersson of Sweden, Charles Michel of the European Union. Green Credits have huge potential to transform the landscape of climate change. Companies and individuals buy green credits to reduce their carbon footprint and corporations do so for meeting climate regulation.  Today as the adjoining WSJ article shows market is about $1 billion for carbon credits expected to grow to $250 billion by 2050.

LyrArc Article Gist
To meet the budget deficit Russia plans to issue $50 billion worth of ruble denominated bonds and privatize $10 billion in state assets every year until 2014. Russia is also changing its policy to attract foreign investment. For the first time since the 1998 financial crisis Russia will turn to international banks and pension funds in the US and Europe to maintain financing for a whole range of activities- from modernizing the military to paying high public sector wages. Russia is planning the sale of a stake in state bank VTB. And shares in oil companies, hydroelectric dams and shipping lines are also expected to go on the market.

LyrArc Article Gist
Raghuram Rajan, former chief economist of the IMF, is appointed the chief economic advisor to Indian prime minister Manmohan Singh. He says his focus is on increasing foreign investment, including letting foreign banks operate in the country, reducing waste in food storage and distribution, and promoting new business so that growth does not depend largely on the large companies in the country.

LyrArc Article Gist
ACE Ltd will acquire Chubb Corp. for $28.3 billion in cash and stock to form one of the largest property casualty insurers in the world. Conditions in this part of the industry are creating a surge in M&A activity as the capital bases of these companies have grown as a result of smaller hurricane claims since 2012 from individuals and business. More competition is reducing prices in the industry and lower interest rates are reducing investment income. Chubb is a well known name based in New Jersey and a large provider of homeowners' insurance to affluent Americans. ACE is in the personal insurance business, and the 2 companies have significant operations in providing insurance to midsize business. ACE shareholders will own 70% of the new company which will assume the Chubb name worldwide. ACE is led by Evan Greenberg, son of Maurice "Hank" Greenberg of AIG. He worked at AIG for 25 years before joining ACE in 2001, becoming CEO in 2004 and chairman in 2007. He expanded ACE in overseas markets, and added more lines of coverage. The company will be based in ACE's location of Switzerland....

LyrArc Article Gist
For decades the auto companies lobbied vigorously against stricter fuel efficiency standards. NYT editorial points to this failure in policy of the Detroit automakers, and the failure of Congress to do more for fuel efficiency standards with lobbying from automakers even in the recently passed legislation. That target of 35mpg fleetwide for 2020, a low target with no stretch or imagination built into it should be revised and a higher target set. If the companies build smaller cars like Europe does they could reach a target of 50mmpg fleetwide by 2020. That would be a serious target with stretch built into it. Tough conditions have to be atttached to any rescue money. This includes firing top management, no payment of dividends, limits on executive pay, tougher fuel efficiency target, reopening labor agreements on pay and benefits to reflect the new realities. If taxpayers are going to take the risks Congress must insist on these changes or the money will be wasted says the NYT editorial. Some of these steps would be painful for workers but they are necessary....

LyrArc Article Gist
Pfizer's Covid vaccine is expected to bring in $6 billion in profit in 2021. Pfizer increased its sales forecast by 70 percent. The coronavirus vaccine is expected to bring in $26 billion in revenues in 2021 with 1.6 billion vaccine doses manufactured for the year 2021. The total could be much higher with the company striving for supply contracts to manufacture 2.5 billion doses.

India has approved the Pfizer, Moderna and J&J vaccines, with this bringing American companies into the Indian vaccine market in 2021.

LyrArc Article Gist
The price of gas powered cars and EV's is closing, to about $5000 according to Cox Automotive. Tesla is cutting prices because of new competition from Japanese, Korean and German models in the US market. China's BYD is also in the global market with new battery technology that cuts cost. Batteries make up 40% of EV car cost. The cost of making EV's will drop to becoming the same as gas powered models by 2027 as companies get more experience in the new technologies, says Gartner.

LyrArc Article Gist
The UAW settlement covered a range of areas setting out a roadmap for other unions. It included getting companies to reinvest in plants and communities where they were pulling out- the Belvidere Illinois plant which Stellantis had planned to close, instead agreeing to hire 1000 more workers for an electric vehicle factory and a parts distribution center, an investment of $4.8 billion. Workers worked long hours during the pandemic- the UAW negotiated for shorter work weeks including 4 day workweek for the health of workers.

LyrArc Article Gist
The bottom line is that China is so advanced in the deindustrialization of the US with US companies cooperating that the only way to get American companies to change course is by creating precisely this kind of situation where China responds with its about 100% tariff to the US 100% tariff. That sends a clear message to American companies and changes the culture of America's deindustrialization American companies are wedded to. Treasury secretary Scott Bessent said DJT raising the tariffs from 34% on April 2 , 2025, Liberation Day by 50% to reach 104%  as a well thought out US tariffs policy was Trump’s “strategy all along.”  Bessent  said: “This was his strategy all along, and that you might even say that he goaded China into a bad position, they responded.” China responded to the 34% DJT tariff by going with it's own 34%. When this retaliatory move suggested China was not willing to consider US arguments that it only wanted a level playing field from China with it's complex system of non-tariff barriers against US imports, DJT added another 50% tariff saying that if China did not withdraw its retaliatory tariff on April 8, US would go with another 50% tariff on April 9. This is what Scott Bessent means by US having put China in a position where it would have to put its own 50% tariff on US products to get to US tariffs at 104% vs. China's at 84%.  The bottom line is that China is so advanced in the deindustrialization of the US with US companies cooperating that the only way to get American companies to change course is by creating precisely this kind of situation where China responds with its about 100% tariff to the US 100% tariff. That sends a clear message to American companies and changes the culture of Aamerica's deindustrialization American companies are wedded to. ...

LyrArc Article Gist
The government's rescue of Fannie Mae and Freddie Mac has so far cost $145.9 billon. According to the Congressional Budget Office its eventual cost could reach $389 billion. The federal government has put the companies on conservatorship and has a 79.9% stake in the companies. The federal governmet also provides a guarantee that investors will be repaid. By buying loans from banks and other companies that originate loans, Fannie and Freddie were ostensibly in the business of promoting home ownership. The implicit governmet guarantee of Fannie and Freddie's activities in the housing market had the potential to create a huge government liability if the activities are not run well, and this is exactly what happened. By pushing hard for increasing home ownership to unsustainable levels - setting a target in 2001 of creating six million homeowners by 2014 for instance way beyond what was sustainable for the finances of prospective homeowners- it only fueled speculation, easy money and a bubble in housing in the U.S. As investors get paid with the government guarantee, it is Fannie and Freddie that is ending up with ownership of foreclosed homes- one every 90 seconds in the the first quarter of 2010, according to an estimate. The two companies owned 168,000 homes in March 2010....

LyrArc Article Gist
New laws in California are designed to protect renters and workers in the internet ride getting business. Landlords will not be allowed more than a 5% increase in rent annually. Workers cannot be classified as independent contractors in the ride hailing business dominated by Uber and Lyft so that workers can benefit from overtime pay, minimum wages, and sick leave.  Other laws in 2019 protect consumers privacy by requiring companies to delete information they collect and stop selling it if consumers request this. 

LyrArc Article Gist
Overseas business locations of US companies offer a way to avoid American government oversight where the business practices have severe adverse effects on the finances and well being of the American public. What responsibility must the US take for ensuring that the deliberate use of such locations to operate independently of government oversight with practices that hurt ordinary Americans savings, is the subject of this report in WSJ. Cryptocurrency firm FTX operated from the Bahamas before being charged with fraud by the US government. 

LyrArc Article Gist
DJT Commerce Department restricts access to US technology to Chinese defense companies. Inspur a server maker and Sugon supercomputer maker are added to the list limiting access. The goal is to restrict access to technology for defense applications including hypersonic weapons. This goes further than the Biden administration.

Export controls don't always work when Chinese companies control ownership in American companies as shown in this example in WSJ for Inspur Corp.

"American technology should never be used against the American people,” -Jeffrey Kessler,  head of the US Commerce department’s Bureau of Industry and Security.

LyrArc Article Gist
The different strategies of Apple and Samsung in getting to the point where the two companies now dominate the smartphone market. Whereas Apple makes only one phone, its iPhone, Samsung's strategy is to have multiple phones in each price segment. It has five levels of Android based phones, with 2-3 models in each price segment. Samsung also benefits from doing its own maufacturing. When faced with a number of technologies Samsung's strategy is to bet on all of the technologies until one of them emerges as a winner, and then concentrate resources on that technology. It uses a similiar strategy for televisions. Apple by contrast places more emphasis on original design and profit margins over sales, gaining sales without eroding margins by being the first innovator in the market. It also has its own unique arrangement for manufacturing at lowcost with Foxconn in China that supports its high margins. Apple is secretive about its designs and promotes its brand heavily with its own retail stores. Apple also uses its innovative edge as leverage to steer profits away from carriers. Analyst estimates are that carriers such as AT&T and Verizon pay about $400 per iPhone to subsidize its cost because this is the only way to get customers into their retail stores. IDC estimates are that the smartphone market is $219 billon in 2012. Both companies are very close in volume- IDC estimates Apple shipped 93.2 million smartphones in 2011, compared to Samsung's 94 million units. Apple has market share of 23.5% in the fourth quarter 2012, up from 16% in 2010. Samsung has 22.8%, up from 9.4% in 2010. Apple and Samsung have together taken 91% of operating profits of all cellphone companies in the fourth quarter, an increase of 30% from 2011, according to Strategy Analytics....

LyrArc Article Gist
Metro Detroit has 90% of the 17,000 cases in Michigan as the pandemic reaches its peak there this week.  The large Detroit airport renovated and enlarged is seen as a source of the coronavirus as Detroit is where all 3 auto U.S. auto companies are located. GM, and Ford have large manufacturing operations in China, and  Chrysler has plants in northern Italy, the locations where coronavirus has hit hard, and in the case of China where it originated. Health experts say the busy Detroit international airport connecting the Detroit hub to other auto hubs in northern Italy and China- both virus hotspots- may have contributed to the virus hitting Detroit early. This country to country transmission along some route is how the virus has traveled to over 150 countries. For instance German reports show Bavaria as the source of the early cases in Italy's Lombardy region. It could be that German auto companies located in Bavaria with large operations in China resulted in inadvertent transmission of the virus from China through airport in Munich from flights between Germany and China. A Shenyang municipal bureau report provides information on German  investment in Shenyang, Liaoning province. Munich based BMW makes 1.3 million cars here. There is also the newly built Chinese German Tiexi industrial park in Shenyang with 50 German companies BASF, Siemens, located there.  Once the virus arrives in one location its spread depends on the environment with densely packed areas and the health conditions prevailing in a particular area playing their part. Both in New York and Detroit metro area this helped its faster spread in lower income densely packed areas.   ...