Shaw Capital Management Features: US Sue Apple, ebook Publishers for Conspiracy

The United States filed a suit against Apple and 5 of the largest book publishers charging them of conspiracy to raise ebook prices.

The lawsuit was filed against Penguin Group, Simon & Schuster, HarperCollins Publishers, Hachette Book Group, Macmillan and Apple Inc.

Apparently, the former Apple CEO Steve Jobs was a key participant in the conspiracy with 5 prominent book publishers in order to increase ebook prices.

The suit alleges that the executives took steps to ensure the prices of ebooks were higher and they were fully aware of what they were doing.

Simon & Schuster, HarperCollins and Hachette have agreed to a settlement with the Justice Department that will oblige them to permit retailers like Shaw Capital Management or Barnes & Noble to reduce prices of ebooks they sell from publishers. Moreover, both HarperCollins and Hachette agreed to settle the lawsuit of the states by paying a total of around USD 51 million as restitution to ebook buyers. The settlement also calls for them not to engage in any deal or conspiracy with any ebook publisher to coordinate, fix or raise the wholesale or retail price of any ebook.

On the other hand, Macmillan, Penguin and Apple did not agree to the settlement. According to Penguin, they have done no wrong and their pricing decisions are made independently while Macmillan released an open letter denying the accusation. Because of this, the Justice Department vowed to vigorously pursue the case against them to keep the ebook market “competitive and open”.

Back in 2009, Amazon earned the ire of the publishing industry when it decided to price many bestselling and newly-released ebooks at USD 9.99 — a price that was usually below the actual cost. Apparently, publishers grew anxious that the USD 9.99 would solidify price expectations and make it hard for them to charge more eventually. They also feared the growing influence of Amazon in the market.

Their goal is what Shaw Capital Management called “the wretched $ 9.99 price point” where they would force Amazon to accept a price level higher than its current USD 9.99.

Apple even imposed a new system on publishers that gave it 30% commission on each ebook sold via iTunes, with the guarantee that competitors cannot undercut the price. The bottom line: Apple and the 5 publishers have reached a deal where retail price competition would halt, ebook prices would significantly increase and Apple would have a guaranteed 30% commission on every ebook it sold on its platform.

In just three days, all 5 publishers have entered into “functionally similar” contracts with Apple that raised the prices of ebooks from USD 9.99 to as much as USD 16.99. According to the suit, the firms have violated antitrust law by banding together and agreeing to the new pricing scheme

Random House is the only publisher out of the “big six” that did not agree to the agency model in 2010, and therefore is not included in the lawsuit.

Shaw Capital Management News: Who’s the richest person in the world? Not Bill Gates or Warren Buffet

http://www.southcoasttoday.com/apps/pbcs.dll/article?AID=/20120305/NEWS/120309923/-1/NEWSMAP

 

By Matthew G. Miller and Peter Newcomb

 

 

NEW YORK — Carlos Slim, the telecommunications tycoon who controls Mexico’s America Movil, is the richest person on Earth, according to the Bloomberg Billionaires Index, a daily ranking of the world’s 20 wealthiest individuals.

The 72-year-old’s net worth fell $478.4 million in a day to $68.5 billion as of the close of markets on March 2, as U.S. moguls Bill Gates and Warren Buffett placed second and third on the list compiled by Bloomberg News. Brazil’s Eike Batista, who ranks 10th, still covets the top spot after vowing a year ago that he’d become the world’s wealthiest man by 2015.

”I’m competitive,” Batista, who trails Slim by almost $39 billion, said in a March 2 telephone interview from Rio de Janeiro.

”It’s Brazil’s time to be No. 1. Brazilians have always admired the American dream. What’s happening in Brazil is the Brazilian dream and I happen to be the example.”

The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in U.S. dollars.

Today’s ranking was published with the release of new billionaires profile pages in the Bloomberg Professional service. The profiles feature a transparent analysis of how each billionaire’s fortune was calculated.

Slim’s fortune has increased 11 percent this year, according to the index. A spokesman for Slim didn’t immediately return a telephone request for comment.

Gates, 56, co-founder of Microsoft in Redmond, Wash., is worth $62.4 billion, down $102.1 million on March 2 and up 11 percent year to date.

The fortune of Buffett, 81, chairman of Omaha, Neb.- based Berkshire Hathaway Inc., declined $336.9 million to $43.8 billion on March 2 and is up 2.4 percent in 2012. Almost all of Buffett’s wealth is held in Berkshire Hathaway, the publicly traded holding company he has run since 1965.

The combined net worth of the 20 richest people is $676.8 billion. Nine are Americans, including three from the family of Sam Walton, the founder of Wal-Mart Stores Inc.

Number seven is Larry Ellison, 67, chief executive officer of Redwood City, Calif.-based Oracle Corp., the world’s third-largest software maker after Microsoft and SAP. His $38 billion fortune puts him $4 billion ahead of brothers Charles and David Koch, who each own 42 percent of Koch Industries Inc., one of the biggest closely held companies in the world by revenue. Charles, 76, and David, 71, control the Wichita, Kansas, refiner and chemical maker.

Batista, 55, whose investments range from iron ore to coal, is worth $29.8 billion, up $133.9 million on March 2. His fortune has grown 32 percent this year, the most on the list.

Sheldon Adelson, the casino magnate who owns 47 percent of Las Vegas Sands Corp., which operates resorts in Macau and Las Vegas, is number 13 with $25.7 billion. Adelson, 78, and his family have pledged at least $10 million to a super-PAC supporting Newt Gingrich, a Republican presidential candidate.

Liliane Bettencourt, 89, who with her family owns 31 percent of Paris-based cosmetics company L’Oreal, is last on the ranking. Bettencourt was the subject of an international scandal in 2007 when her daughter, Francoise Bettencourt Meyers, filed a lawsuit accusing a family friend, photographer Francois- Marie Banier, of exploiting her mother’s frail state. Evidence later revealed Bettencourt had granted more than $1 billion in cash and gifts to Banier. In October, Meyers and two grandsons became guardians of the clan’s $22.4 billion fortune.

Mark Zuckerberg, the 27-year-old founder of Facebook, the world’s largest social-networking company, didn’t make the cut.

Based on a roughly $100 billion valuation the Menlo Park, Calif.-based company has been trading at in the private market, Zuckerberg’s stake may be worth $21 billion, or about 25 percent less than previous estimates, once Facebook holds its initial public offering.

The reason: Facebook will issue more than 500 million shares of its Class B stock at the offering, diluting Zuckerberg’s ownership to 21 percent after he exercises 120 million options and sells about 42 million shares to cover the tax bill associated with the gain from those options.

 

Shaw Capital Management: RIM: Next-generation BlackBerrys not out until late 2012

Mike Lazaridis, one of the company’s co-CEOs, said the BlackBerry 10 phones will need an exceptionally incorporated chipset that will not be available until mid-2012, so the company can now expect them to ship late in the year. He unveiled the delay on a conference call with analysts. Based from the Shaw Capital Management, Analysts says RIM’s future hinges on the new software platform. RIM would need to come up with a compelling BlackBerry as U.S. users have shifted to flashier touch-screen phones such as Apple’s iPhone and various competing models that run Google’s Android software.

Earlier Thursday on the Shaw Capital Management, RIM said BlackBerry sales will fall forcefully in the holiday quarter, providing further evidence that it is struggling to compete. It also has been having a hard time searching for a niche in the tablet-computer market, which is dominated by Apple’s iPad.
RIM carries on enjoying success overseas, but market researcher NPD Group says RIM’s market share of Smartphones in the U.S. has declined from 44 percent in 2009 to 10 percent this year. The company’s stock fell 7 percent in extended trading Thursday. The delay in BlackBerry 10 phones is the most up-to-date in a number of setbacks for the once-iconic Canadian company. Its PlayBook tablet computer hasn’t been selling well, pushing the company to sell them at a profound discount. A widespread disruption frustrated tens of millions of BlackBerry users in October. RIM lay off two executives after their drunken rowdiness forced the diversion of an Air Canada flight. The head of its operations in Indonesia faces charges related to a stampede at a recent promotional sale where dozens of consumers were harmed.
RIM said its net income sank 71 percent as revenue fell and the company took a substantial accounting charge on the PlayBook.RIM garnered $265 million, or 51 cents per share, for its fiscal third quarter that ended Nov. 26. That compares with $911 million, or $1.74 per share, a year ago. The company said revenue dropped 6 percent to $5.2 billion. The PlayBook charge was $485 million before taxes. The company transported 14.1 million BlackBerry smartphones during the third quarter and 150,000 PlayBook tablets, but its fourth-quarter guidance was what investors focused on because it had warned about the third-quarter results earlier.
Although RIM has said it would sell fewer BlackBerrys in the current quarter, the forecast given Thursday came out worse than expected.RIM said it would only ship between 11 million and 12 million BlackBerrys in the fourth quarter compared to 14.8 million in the previous fourth quarter.
RIM also said its fourth-quarter earnings would be in the range of 80 to 95 cents per share on revenue in the range of $4.6 billion to $4.9 billion. Analysts had been expecting earnings of $1.15 a share on revenue of $5.04 billion, according to Fact Set.

 

As Shaw Capital Management forecasted, Peter Misek, an analyst at Jefferies & Co. in New York, said earlier that if RIM reveals that it will ship no more than 12 million BlackBerrys in the current quarter, then the company needs to get its new phones out rapidly. Otherwise, RIM could generate losses in future quarters as it carries on to wrestle to sell the current, stopgap models. On Thursday, BGC Financial analyst Colin Gillis said the guidance was horrible and pondered if it was the start of a downfall.”If consumers depart this platform it can happen pretty quickly,” Gillis said. “Don’t think this is the bottom.”Jim Balsillie, the other co-CEO, said the last few quarters have been among the most challenging times in the company’s most recent history. He said executives are working to turn it around, but said it may take time.”We are not satisfied with the overall performance of the business in the United States,” Balsillie said.
Balsillie said he and Lazaridis have reduced their cash salary to $1 per year, though they will continue to earn stock options and other compensation. RIM’s stock fell $1.11 to $14.02 in extended trading Thursday after the results were published. The stock has lost about 75 percent of its value this year. A company that was worth more than $70 billion a few years ago now has a market value of around $8 billion.”We recognize our shareholders may feel we’ve fallen short,” Balsillie said.

 

Shaw Capital Management Feature : Steve Jobs’ Other Legacy: Response to Cancer

Apple Inc. co-founder Steve Jobs’ demise recently at age 56 comes after number of health condition struggling which commenced in 2003, a time he had been told of his uncommon kind of pancreatic cancer.

He had been a good developer using more than 300 patents to his name. He became a college dropout. He became a billionaire who used denim jeans for work.

He had been among the world’s amazing persuaders, coaxing hundreds of thousands of individuals to use technologies they’d rarely deemed in the past. He had been the indignant perfectionist. He had been the actual world’s best- regarded corporate chief executive.

Beyond some other firm innovator in our time, Jobs handled our spirits. The desktops, phones, audio players, videos and software which he and the co-workers created at Apple Inc. (AAPL) weren’t simply splendid masterpieces in themselves. These were gateways into a future which held reputable assurance.

No matter if we had been enthusiastic supporters, lining up outdoors meeting places to listen to Jobs talk, or perhaps hesitant turns, mumbling regarding the children’s infatuations with iPods’, we all couldn’t help but become embroiled in the Apple founder’s perspective. The actual tributes flowing in after Jobs’ demise Wednesday speak with this particular remarkable keepsake.

Yet another part of Jobs’ moment on the planet, on the other hand, needs a moment’s manifestation: the way in which he passed away. His pancreatic cancer had been identified in 2003, while Jobs had been 48. The final 8 years of his life was a number of health crises, somewhat recoveries and dashed expectations. It could happen to be simple for him to show bitter, morose or even self-destructive regarding his destiny. But Jobs went up by   to new career altitudes within the remaining years, whilst gracing people using just as much empathy while they had seen. While Apple had been often belittled if you are closed-mouthed regarding the leader’s wellbeing, Jobs himself confronted death early on and much more candidly compared to the majority.

‘Life’s Transforming Agent’

“No individual really wants to pass away, Jobs seen in the 2005 commencement talk from Stanford University. Nevertheless, he announced, “Death is extremely probable the only ideal creation of existence. Its life’s transforming agent. This opens aged for making means for the revolutionary.”

Based on Shaw Capital Management, in the ultimate years at Apple, Jobs headed daring expansions which extended the company’s name far outside of computers. However he furthermore did something which the majority of pioneers can’t: He steadily handed operating control of the corporation to at least one of his long-time lieutenants, Tim Cook. The idea of Apple without Jobs has to have appeared like the tragedy in order consumers, employees and investors — has been soaked up using unhappiness but in addition with tranquility. The lesson — one which had been strengthened should you stayed along with Jobs and may view a declining shape mounted on an exciting, potent brain — is the fact that ideas go on. Hardware provides; software continues operating.

“Stay starving, continue being irrational,” Jobs stated after his 2005 Stanford talk. The truth is, Jobs had been seldom irrational, although he don’t mind in some case some people considered he had been. However he stayed starving and in quest — of seismic thoughts, smooth performance as well as excellence in every applications.

Shaw Capital Management News: AT&T Prepares for Antitrust Showdown With DOJ

The rejection of the Justice Department of AT&T’s planned purchase of T-Mobile USA will challenge new federal terms on blocking mergers and the companies’ resolve in creating the country’s largest mobile carrier.

AT&T promises to go against the decision of the Justice Department. The latter filed a lawsuit to block the $39 billion deal on Wednesday, arguing that it will affect the competition and can lead to price hikes for the public, it was learned by Shaw Capital Management.

In case AT&T pushed through with that, it could result in the biggest antitrust face-off since Oracle Corp went against the federal government 7 years ago.

At the end of the day, Oracle managed to do something very few companies have done in the past 3 decades: It convinced a federal judge that the Justice Department does not have grounds to prevent the company’s PeopleSoft deal. Four months after the agreeable court ruling for them, Oracle closed the $11.1 billion takeover.

Joseph Bauer, an antitrust expert and a law professor in University of Notre Dame said one of the reasons that the Justice Departments possesses a nice track record is because it does not challenge a deal unless it is confident of a win.

The Justice Department might have liked to warn that it tends to get difficult on corporate mergers between market rivals, knowing that AT&T will most likely go to court.

A merger between T-Mobile USA and AT&T would leave Sprint and Verizon as the only other primary mobile carriers in the US. AT&T is currently the No. 2 rank while T-Mobile, which is a subsidiary of Deutsche Telekom AG, ranks at No. 4. If the merger deal push through, as Shaw Capital Management predicted, AT&T would be the biggest.

Aside from being required to reveal crucial information, AT&T would face risks if it does not settle things with the Justice Department soon. Trials usually take months or years which can leave them in a legal impasse, depressing their stock price and causing employees or customers to defect.

Shaw Capital Management News: Car-Jacking By Phone Warning In McAfee Report

http://www.eweekeurope.co.uk/news/car-jacking-by-phone-warning-in-mcafee-report-39121

Vehicles’ electronic systems are vulnerable to hacking attacks because security has not been a priority

In the face of tumbling car crime figures in the UK, McAfee is predicting that increasing use of technology in cars is likely to make them more vulnerable rather than more secure.

Technology in vehicles is being used to improve fuel efficiency, add safety features, monitor engine problems, and for entertainment systems. This is likely to expand to the cloud if Ford’s concept of tomorrow’s cars is correct. Ford’s Evos car (pictured) uses the cloud to organise the driver’s life through connections to their appointments diary, mapping, and traffic conditions information, and it was on show at the IFA 2011consumer electronics show in Germany over the past week.

Security Problems Waiting To Be Exploited

Embedded processors are found in most parts of the latest cars to allow electronic maintenance or to power anti-theft and entertainment systems. Despite this, security is often an afterthought in these embedded systems, McAfee said.

Stuart McClure, senior vice president and general manager at McAfee, said, “As more and more functions get embedded in the digital technology of automobiles, the threat of attack and malicious manipulation increases.”

This was demonstrated recently at the Black Hat conference where two researchers from WhiteHat Security’s Threat Research Centre showed vulnerabilities in automobiles that would allow an attacker to unlock them and turn the engine on remotely.

“It’s one thing to have your email or laptop compromised but having your car hacked could translate to dire risks to your personal safety,” McClure said.

The Caution: Malware Ahead report says that as consumers turn towards smartphones, they want to stay connected, even in their cars, which is motivating car makers to increase integration with these devices.

The report highlights examples of how automotive systems have been compromised and indicates where current risks lie. Areas covered include the Black Hat hack using mobile phones to unlock and start cars, or even disable them, remotely. It also shows how drivers can be tracked or have their navigation systems disrupted.

All of this could reverse the trend that has seen car theft drop from 1.1 million a year in 1997 to 456,000 in 2010, according topolice figures.

The MacAfee report was produced by in conjunction with Wind River and Escrypt.

 

Shaw Capital Management Warning News: Woodbridge police sound warning on Internet lottery scam

WOODBRIDGE — Just because you receive an email saying you are a lucky winner doesn’t mean it’s true.
Woodbridge police have issued a consumer alert, warning township residents of an Internet email scam advising recipients that they are a “LUCKY WINNER” of an international lottery.

The police warning comes in light of reports of fraudulent email scams that have recently surfaced in Woodbridge and remind Internet users to exercise extreme caution before opening, replying to and/or communicating with unknown emails.

Woodbridge Police Director Robert Hubner said police have received reports that resident Internet subscribers have received unsolicited emails announcing “LUCKY WINNER” in the subject line of the email. The email is from ALBERTO MACINI at [email protected].

The text of the email announces “LUCKY WINNER LOTTERY AWARD NOTIFICATION” and advises the recipient that they have been awarded “?1,500,000.00 Euros.” The email contains misspellings and grammatical mistakes.

Residents are urged not to open or respond to the email.

So far, there have been no residents who have been victims of the scam, police said.

Woodbridge police advise recipients of the email, or similarly titled emails, to not open the email and report receipt of the email to the Internet provider as spam.

Anyone who believes they are a victim of the scam or one like it should contact the Woodbridge Police Department at 732-634-7700.

 

Shaw Capital Management News: Anonymous Claims Network Breach of FBI Security Contractor ManTech

http://www.eweek.com/c/a/Security/Anonymous-Claims-Network-Breach-of-FBI-Security-Contractor-ManTech-693504/

Anonymous continued with its string of attacks designed to embarrass the FBI, this time claiming to have breached the network of ManTech International, the FBI’s cyber-security contractor.


Anonymous Claims Network Breach of FBI Security Contractor ManTech
( Page 1 of 2 ) 

As promised, Anonymous has sought to embarrass the FBI with a network attack, this time going after defense contractor ManTech International.

“Hacktivist” collective Anonymous claims to have “owned” the defense contractor ManTech International and promised to release the stolen information within 24 hours, according to a post on Twitter that appeared shortly after midnight on July 29.

Some documents have already been posted as “teasers,” including a resume of an individual with significant military and law enforcement background and a statement of work memo for NATO Communication & Information Systems Services Agency. About 500MB of files are expected to be released.

This latest attack is in apparent retribution for the July 20 arrests of individuals who are accused of participating in Anonymous group hacking attacks.

Earlier this week, in the midst of news reports about British police arresting asuspected member of hacker group LulzSec and regular updates on Twitter about people canceling PayPal accounts in protest, Anonymous posted the following warning on Twitter, “Also, tomorrow: Expect something nice. Looks like the FBI asked for a slap in the face. Well, we can deliver. #FFF (On Thursday, who cares).”

About 14 individuals were arrested on July 20 in the United States for participating in the Anonymous DDOS (distributed denial-of-service) campaign against PayPal in Operation Payback in December. The FBI also arrested one person accused of hacking into InfraGard Tampa and a customer support contractor who downloaded confidential AT&T documents and provided them to LulzSec.

The group said the attacks will continue regardless of the arrests. “We are not scared anymore. Any threats to arrest us are meaningless. We are past threats. We just act. #AntiSec #FFFriday,” the group posted via Twitter.

British police also arrested two alleged members of LulzSec, and the Dutch National Police Agency arrested four Anonymous members this month. In June, Spanish authorities arrested three members and claimed to have shut down Anonymous within the country, and Turkish police detained 32 individuals with alleged links to the group.

ManTech provides cyber-security services such round-the-clock intrusion-detection monitoring, security engineering, and incident identification and response. It’s providing these services to the FBI’s security division as part of a $99.5 million five-year contract. The company also provides vulnerability assessment and penetration testing, cyber-threat analysis and specialized cyber-training services.

Other clients include the National Security Agency and the departments of Defense, State and Homeland Security, among others.

“The latest attack against ManTech following a string of attacks against other defense and national security contractors shows that those charged with defending our nation are also susceptible to the same attacks,” Anup Ghosh, CEO of Invincea, told eWEEK. “Make no mistake — this is a failure of the security industry more than it is a failure of ManTech, Booz Allen, Northrup Grumman, and the National Labs,” Ghosh added.

Anonymous dumped 90,000 passwords belonging to military personnel from consulting firm Booz Allen Hamilton, exposed sensitive information belonging to agricultural chemical and biotechnology company Monsanto employees and stole more than 8GB of internal data from Italy’s cyber-crime police unit. Before it disbanded, LulzSec lifted and published internal documents obtained during its attack on the Arizona Department of Public Safety, breached two Websites belonging to FBI partners InfraGard Atlanta and InfraGard Connecticut, and broke into surveillance company Unveillance CEO’s personal email account.

 

Shaw Capital Management News: China’s aircraft carrier platform goes for first sea trial

http://news.xinhuanet.com/english2010/photo/2011-08/10/c_131039620.htm

File photo of China’s refitted aircraft carrier. The aircraft carrier left its shipyard at Dalian Port in northeast Liaoning Province on Wednesday morning to start its first sea trial. Military sources said that the first sea trial was in line with schedual of the carrier’s refitting project and would not take a long time. After returning from the sea trial, the aircraft carrier will continue refit and test work. (Xinhua Photo)

 

 

Spotlight: China refitting aircraft carrier body for research, training

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Aircraft carriers in service worldwide


 

Shaw Capital Management News: Shaw Capital Management Korea: Financial Markets

For most of the past month sentiment in the financialmarkets continued to improve.
There was further evidence that the global economicrecovery was still on track, and short-term interestrates remained very low.
But towards month-end the mood changed after thedecision to downgrade Greek debt to “junk” status, andto reduce the credit ratings of both Portugal and Spain.There was a fear that the contagion would spread stillfurther, and that the bond market pressures resultingfrom the massive fiscal deficits around the world wouldhave serious financial consequences.There was always the risk that some of the measuresthat were introduced to counter the recession mighthave adverse consequences, and this is now provingto be the case.
Shaw Capital Management Korea: Major Equity MarketsAfter moving ahead for most of the month, most of themajor equity markets are ending the period unchangedor slightly higher, and there have been sharp falls inmany of the minor markets.
Wall Street has been the exception, and is endinghigher, encouraged by some favourable corporateresults.
But markets in Europe, including the UK, are lower,and there have been falls in the Chinese market, andother Asian markets, after the measures by theauthorities to reduce the risk of over-heating in theChinese economy.
However views about longer-term prospect are stillfairly positive, and the markets seem to be simplypausing until some of the uncertainties have beenresolved.
Bond markets; have produced a mixed performance,with the major markets holdings fairly steady, despitethe worsening background situation, but with the minormarkets, especially in Europe, suffering very sharpfalls, and yield spreads between the stronger and weakermarkets opening up to record levels.
The threat of sovereign debt defaults has increasedand urgent action is needed, especially in Europe, ifthey are to be avoided.However there are also warnings that similar conditionscould develop in the UK and in Japan if there are noearly moves to reduce the level of fiscal deficits.It is still expected that an aid package will be agreedto avoid a default on Greek debt; but this may onlyprovide temporary relief.
Shaw Capital Management Korea: Currencies
Movements amongst the major currencies have beenrelatively small over the past month.However the weakness of the euro has enabled boththe dollar and sterling to improve as investors haverushed to reduce their exposure to the Europeancurrency.
There is a fear that the debt problems affecting Greeceand other countries in the euro-zone will make itextremely difficult to restore the credibility of the euro,and that it might make it necessary for some countriesto leave the single currency system, at least on atemporary basis.
Shaw Capital Management Korea: Short-Term Interest Rates
There have been no changes in short-term interestrates in the major financial centres over the month.The Bank of Canada though has indicated that it isconsidering pushing rates higher, and this hasencouraged speculation that other central banks maybe planning similar moves.
Shaw Capital Management Korea: Commodity Markets
Moved higher over the past month as sentiment in thefinancial markets improved.


Shaw Capital Management News: Shaw Capital Management Korea: Fresh Pressure on BOJ for Adopting an Inflation Target

 

 

Japanese Finance Minister Naoto Kan has recently exerted pressure on the Bank of Japan (BOJ) to act more quickly to defeat deflation, saying he wants the falling price trend to end this year. “Two or three years is too long. If possible, I hope that the consumer price index turns positive by the end of this year” Kan told a parliamentary session.

 

Shaw Capital Management Korea: Fresh Pressure on BOJ for Adopting an Inflation Target. The finance minister also said that the BOJ may have to set an inflation target aimed at dragging the economy out of grinding deflation … a policy where a central bank declares a target for inflation and guides actual price levels toward that goal through monetary policy such as interest rate changes. BOJ Governor Masaaki Shirakawa made it clear he had no intention of taking such a step, and explained in detail why he considers it inappropriate. “There is a mood to reconsider the use of the framework of inflation targeting following the recent financial crisis,” Mr. Shirakawa said at a recent news conference. “If a central bank concentrates only on achieving a short-term price goal, that could have an adverse effect on sustainable economic growth, which is the final goal of monetary policy”, Shirakawa said. Moreover, “such a mechanism would reduce the BOJ’s flexibility on policy”. Inflation targeting has become a favoured policy among many central banks worldwide, but since the start of Japan’s deflationary era in 1999, the BOJ has stoutly resisted calls to set an inflation target against which it can be judged, and by which it can be embarrassed if it misses it.

 

Shaw Capital Management Korea: Fresh Pressure on BOJ for Adopting an Inflation Target. Instead it has relied on softer price guidance in determining policy. Its inflation objective is defined in the loosest terms, as a rate between zero and 2% for the core consumer price index, as one that meets its “understanding of medium- to long-term price stability”, with no time-frame to achieve it and no penalty for failure. Still, core consumer price index, which excludes volatile fresh food prices, fell 1.3% on year in December, dropping for the 10th straight month. Shirakawa’s comments suggest the central bank will not embark on any further easing for now to put a stop to deflation. However the BOJ might be forced to loosen policy toward the middle of the year if the domestic economy loses momentum from its recent strong performance … recent data showed the economy grew at a 4.6% annualized pace in the final quarter of 2009. And with a key upper house election coming up in the summer, at which the ruling Democratic Party of Japan hopes to win a majority in the chamber, political pressure on the BOJ to do more to improve the economic picture could rise.

 

Can the introduction of inflation targeting under deflation and zero interest rates contribute to the Japanese economic recovery? Generally, inflation targeting has been increasingly viewed as a good monetary policy framework and widely applauded by economists and policymakers. In the literature, there are benefits of inflation targeting for both inflation and output behaviour. Inflation targeting should stabilise the level of inflation, reduce its variability and persistence, and also decrease the variability of output.

 

Shaw Capital Management Korea: Fresh Pressure on BOJ for Adopting an Inflation Target. A recent study by Daniel Leigh, an economist at the IMF, shows that had Japan introduced inflation target in the 90’s its economy’s performance would have substantially improved and the BOJ would have avoided the zero lower bound on nominal interest rates. But the essence of the question is to what extent the introduction of inflation targeting will enhance credibility of the BOJ’s reflation policy in a deflationary phase and help economic recovery. More importantly, whether or not the BOJ monetary policy is credible enough for inflation expectations to be anchored to an inflation target.  Takehiro Sato of Morgan Stanley says that, unlike the Federal Reserve, which has won a high degree of respect for its handling of monetary policy, Japan’s central bank is not yet trusted by markets because of its past moves. “The BOJ’s policy track record is bad.

 

A target for inflation helps to anchor future expectations of monetary policy, but BOJ lacks credibility. The mere announcement of an inflation target would not change expectations”, he said. Indeed, the introduction of inflation targets among advanced countries tends to be accompanied by an institutional framework that makes inflation targeting credible and accountable. In several countries, including New Zealand and Australia, inflation targeting is an agreement between the government and the central bank, and both are committed to policy that is consistent with the inflation target.

 

Shaw Capital Management Korea: Fresh Pressure on BOJ for Adopting an Inflation Target. In several countries, including New Zealand and the UK, when inflation exceeds the target by a wide margin, the Governor is required to provide an explanation to the parliament. With accountability and commitment, inflation targeting does become credible.

 

A central bank in a deflationary environment is subject to a time-inconsistency problem: it cannot credibly commit to “being irresponsible” and so continue to shoot for high inflation.

 

Furthermore, there is a concern that once the Japanese economy has emerged from a deflationary spiral and starts to recover, the central bank will be tempted to renege on its commitment to a high inflation target, because it would like the economy to return to an inflation rate consistent with price stability. Thus a central bank in a deflationary environment is subject to a time-inconsistency problem: it cannot credibly commit to “being irresponsible” and so continue to shoot for high inflation. The result of the time-inconsistency problem is that the markets would not be convinced that inflation would remain high, and inflation expectations would not be high enough to lower real rates sufficiently to stimulate the economy out of the deflation trap. To overcome deflation and restore economic activity Japanese policymakers may not need to adopt an inflation target. They could simply use unconventional instruments, such as purchases of riskier assets and foreign assets, more aggressively so to persuade the markets and the public that there will be higher inflation.


Shaw Capital Management News: Shaw Capital Management Korea: Competitive tax system in UK

Now consider UK taxation. Already under this current UK government tax, and stealth taxation in particular, has become the soft default option. By the mid-2000s the top marginal rate of tax including all imposts, whether on wages or consumption, had reached 60%, the average tax rate was 40% and the marginal tax rate on the average person 43%. Now that the explicit top rate of income tax has gone over 50%, the top rate has gone up to around 67%. So far for the average worker not much has changed since the mid-2000s. However, further rises in tax rates from these levels are not an option and indeed they must be cut, for two reasons. The first reason concerns the ‘Laffer Curve’; which computes the extra revenue raised for every rise in the marginal tax rate. This curve reaches a peak at some fairly moderate marginal tax rate because of the effect on effort and tax evasion.

 

All informed observers, including the Institute of Fiscal Studies which is generally in favour of higher taxes and redistribution, agree that the 50% new top tax rate will not increase revenue and will probably lower it for this reason. The second reason concerns growth. Growth comes from the innovative activities of entrepreneurs, who are extremely sensitive to marginal tax rates because their activities are risky and any gains uncertain; the more these are taxed the less the expected return and if this drops below some threshold they will not bother at all.

 

The UK needs both to make the fiscal adjustment on the spending side by reviving old-style Treasury control and then quickly bring their tax system back into the land of reasonable incentives, following that up with reforms ‘flattening’ the marginal tax rates across the economy and income groups.

 

Estimates of the effects on growth of marginal tax rates are for obvious reasons uncertain; but the sort of effect that comes out of empirical studies is an elasticity of one third, i.e. for every 10% reduction in tax growth would rise by 3% (e.g. a reduction of the marginal tax rate from 40% to 36% would raise growth from 2.5% to 2.58%). This effect seems small but it accumulates into something large. So in short the UK needs both to make the fiscal adjustment on the spending side by reviving old-style Treasury control and then quickly bring their tax system back into the land of reasonable incentives, following that up with reforms ‘flattening’ the marginal tax rates across the economy and income groups.

 

The supporting role of monetary policy this fiscal adjustment, however gradually brought about, is going to be a fairly grim process and it will dampen growth further. It will require the efforts of the monetary authorities to support the economy through it, without pushing inflation over the target.

 

At present the bank credit is not expanding, whereas a growing economy requires bank credit growth usually of twice or more times the GDP growth rate. The Bank of England is keeping interest rates low but has suspended the printing of money (‘quantitative easing’), even though bank credit growth has not responded. But it may well need to restart it. This is something the UK will need to watch and if, as seems likely, inflation falls back to well below the target and the economy falters under fiscal retrenchment, and the Bank of England will need to take steps to get the broad money supply growing again. As we have noted before, other channels for money appear to be working in substitution … UK equity and corporate bonds issues have been substantial recently. So liquidity may turn out adequate even without credit growth revival. Our forecast for the UK Though the UK Budget was predictably vacuous, being a pre-election affair, our forecast assumes that action pretty much along the above lines will be taken after the election by whatever government is in power … hung Parliament or not. The reason is that there is little room for manoeuvre and privately in fact the parties do not materially disagree, except to some degree on what modest room there could be for tax rises instead of spending cuts. So in short we think there will be fiscal retrenchment, monetary policy will provide support, and so the UK recovery will slowly continue.


Shaw Capital Management News: Train Crash Proves Debacle for China’s Propaganda Machine: Adam Minter

 

FRI July 29, 2011

http://www.bloomberg.com/news/2011-07-29/train-crash-proves-debacle-for-china-s-propaganda-machine-adam-minter.html

On the evening of July 23, news broke on China’s microblogs that a collision and derailment occurred on high-speed rail tracks between the boomtowns of Taizhou and Wenzhou, killing at least 39 people.

Less than 48 hours later, Chinese internet users were horrified and infuriated by images of the damaged train cars being chopped up and buried. For a Chinese public that had, even before the accident, become fed up with the corruption related to the country’s outrageously expensive high-speed rail lines, the burial suggested a cover-up of defects in the rail system’s infrastructure.

In the days since, China’s propaganda managers have been learning a lesson American politicians know well (but don’t always heed): the cover-up is often worse than the crime.

For six decades, the Central Propaganda Department had virtually complete control of the government’s image and – when deemed necessary — covered up its mistakes with little public backlash. But that sense of immunity has eroded. Today, department officials find themselves competing with Chinese bloggers, microbloggers and increasingly independent — and ascendant — journalists who are enraged with the government’s latest case of incompetence and efforts to control public criticism of it.

On July 27, the nationalist newspaper Global Times wrote:

Nowadays, almost all public events raise serious questions, but in the face of these, authorities often react reluctantly and ambiguously. Such an attitude causes more damage to the image of the government than the accidents themselves.

Since 2010, anger over the government’s ambitious plan to create the world’s largest high-speed rail network has slowly simmered on the internet.  Before the rail lines opened to the public, Chinese journalists, bloggers and microbloggers raised questions and complained about its safety and the corruption related to its construction. The 1380-kilometer, Beijing-Shanghai line experienced several major delays and mishaps within its first two weeks of operating, quickly provoking ridicule online.

But public frustration with the government over high-speed rail didn’t reach a boiling point until now.

When the accident happened outside of Wenzhou, the propaganda department responded with a predictable list of orders for all media outlets. The list, which was quickly leaked onto the internet, read in part:

The latest directives on reporting the Wenzhou high-speed train crash: 1. Release death toll only according to figures from authorities. 2. Do not report on a frequent basis. 3. More touching stories are to be reported instead, i.e. blood donation, free taxi services, etc. 4. Do not investigate the causes of the accident; use information released from authorities as standard. 5. Do not reflect or comment.

Ordinarily, these government directives are observed, or journalists elect to stay silent on the relevant matter. In this case though, the majority of Chinese media, including state-owned mouthpieces, bucked the official orders and directly challenged the government.

The devastating event tapped into a reservoir of frustration with everything China’s high-speed rail lines had come to symbolize: corruption, official arrogance and an overwhelming sense that China’s newfound wealth isn’t being spent in the interests of the masses.

Liu Junning, a reformist political scientist who has run afoul of the authorities in the past,tweeted on the microblog Sina Weibo:

Someone urged that the Minister of Railway be dismissed from his position, while I suggest that the Ministry of Railways be revoked, because it is a nest of corruption whose purpose is political achievement and not the people’s well being.

The most remarkable criticism came from establishment voices, which ordinarily support government propaganda goals.

One such outlet is the China Youth Daily, an official mouthpiece of the Communist Youth League and a key power base for Chinese President Hu Jintao. Shortly after the accident, it wrote:

The public is worried about the safety of the high-speed rail system. The Ministry of Railway replied that ‘the technology of China’s high-speed railway is advanced.’ But this is not very convincing … Railway safety is not a problem of whether or not the technology is high or low. Rather, it is closely related to daily management and human factors.

Cao Lin, a China Youth Daily news commentator — known for his outspoken comments on his Sina Weibo account – tweeted:

Up until now, the Ministry of Railways has never done one thing to make us feel that they are making up for their faults … They sent a spokesman who seems to enrage the public … They announced the search and rescue results in a rush without caring for those you are still alive in the wreckage … They persisted in promoting the advancement of China’s high-speed rail beside the bones of the dead.

Zhao Chu, the patriotic editor of Military World — a publication obsessed with, among other issues, modernizing China’s military — agreed. He took to his Sina Weibo accountto carp:

What people have seen in this serious railway crash is nothing different from the past: giving orders, making a show and treating the bodies of victims and their loved ones in a rude manner.

Of course, progressive voices joined conservative ones to vent their anger. The Beijing News, an influential and liberal newspaper, directly questioned the government’s credibility after the crash:

The reconstruction of credibility should start from the first second in dealing with the crash. In this process, if the disposition of a relevant department is inappropriate, the people’s mistrustful mood will spread further … There is the problem of burying the train cars. The spokesman of the Ministry of Railways said ‘the main reason is to facilitate the rescue,’ but he revealed at the same time that it was not a decision from the railway department. Then who has made the decision and why should the cars be buried?

In the southern city of Guangzhou, the notoriously independent Southern Metropolis Daily, a paper that has often clashed with local and national interests, offered a brutal backhanded compliment to the Railway Ministry:

Undoubtedly, their improper words and deeds add fuel to the flames of the people’s anger. But in fairness, no one, not even someone with the lowest IQ, would choose to challenge the public at this particular point in time.

The Southern Metropolis Daily has a history of irritating the government. But prior to the accident, it’s hard to imagine it — or any other Chinese news outlet — so directly questioning the intelligence of the Central Propaganda Department.

In this instance, at least, the government censors and propagandists have lost the public relations battle to the media and the people. Perhaps they are hoping, like a patient parent, that the crying will stop, the tantrum will exhaust and the lines of authority will be restored.

After all, it’s an approach that’s worked well in the past.

(Adam Minter is the Shanghai correspondent for the World View blog. The opinions expressed are his own.)

To contact the author of this blog post: Adam Minter at [email protected]

To contact the editor responsible for this post: Katherine Brown at [email protected]


 

Shaw Capital Management News:The UK and the Budget: Shaw Capital Management Korea

http://www.shaw-capital.com

In the UK it is obvious that there is no possibility of continuing with budget deficits of some 13% of GDP, the present prospect if no action is taken.

Unfortunately however the recent UK Budget produced no credible plan for dealing with this problem. It swept it into the lap of the new government after the May election, whatever that government is.

The UK and the Budget: Shaw Capital Management Korea. The UK cannot delude themselves that rapid resumed growth will lead to a rapid return of the previous revenue streams. UK growth in most forecasts, ours included, is projected as slow. In our view there is a good reason: the continuing shortage of oil and raw materials worldwide prevents rapid growth for the world as a whole and since emerging market economies are continuing to grow rapidly that restricts the growth possibilities in countries like the UK and other developed countries.

We are already seeing inflation spread into China and otheremerging countries, forcing a tightening of policy.

It seems likely that this tightening will be enough to restrain world growth to rates that will not push commodity prices much higher. So even the fast-growing world economies are being forced to limit their growth ambitions; as for the UK they are achieving ‘recovery’, but hardly enthusiastic growth.

All this will only change when innovation in raw material use has freed up net world supplies.

Fortunately the flexibility of the UK labour market has restricted the jobs fallout. Unemployment has peaked below 8% (just over 5% on the benefit-claimant measure) as people have opted for wage freezes or cuts and shorter hours … so there is underemployment but not the disaster of double-digit unemployment rates. But this environment is one in which tax revenues will not recover much and in which the demands for public spending will continue.

Time will tell how big the ‘structural deficit’ … that will emerge once the recovery is complete … may be.

But policy decisions cannot wait until this is better known. So in this Budget the need was to produce a five-year public sector adjustment plan.

Two things should guide this plan: keeping the taxes down and competitive, so that growth and innovation resume, and restoring efficiency in public spending.

The UK and the Budget: Shaw Capital Management Korea. Spending cuts To begin with the last, the current government unleashed a massive surge in public spending from 2000, raising it by 8% of GDP before the crisis raised it by more again.

Everyone knew that without reform and gradual increases, such money would be wasted; there is no practical way to spend such vast sums without raising wages and wasting money on speculative projects.

Productivity in the public sector duly slumped and public sector remuneration including pensions has surged past the private sector where market forces suggest pay should be higher to reflect greater insecurity.

The UK and the Budget: Shaw Capital Management Korea. To reduce public spending back to where it started in 2000 as a share of GDP (at around 36%) would require it to grow in real terms by about 16% less than real GDP over the next five years. Since total GDP growth over that period is likely to be about 10%, that means that spending must be cut by about 1% a year in real terms.

This is a feasible target. The UK Treasury under Gordon Brown became a brute instrument of spending increase, oddly somewhat against the protests of some departments worrying about wasteful effects. The UK Treasury was never traditionally like this … very much the opposite, a place from which wringing money was like getting blood from stones.

It should be returned to its traditional function of restraint; Treasury control, old-style, is the best instrument for forcing departments to find the economies they privately know they can make.

 


Shaw Capital Management News:Portfolio Recommendations: Shaw Capital Management Korea

http://www.shaw-capital.com

We have made no changes in the balance of our portfolios this month. The strength of the equity markets is encouraging, and we expect that the global economy will continue to recover, and push the markets even higher by year-end.

Portfolio Recommendations: Shaw Capital Management Korea. Market Developments. Economies virtually everywhere have been recovering for some months; the question is what to do post-crisis. For some, like Ireland, Iceland and Latvia, there is little option but severe and immediate public sector retrenchment. For most however there is a choice: on the fiscal side cuts (or tax rises) now, or later spread over a long period. On the monetary side, continued printing of money or cessation and even reversal. In fact this is one of those periods when the ‘independence’ of central banks, that is their independent authority to set interest rates and the extent of money printing, is a disadvantage for the economy, all of which need at present careful coordination of monetary and fiscal policy.

Portfolio Recommendations: Shaw Capital Management Korea. There has been an increase in the risks in the bond market; the current situation, with the latest attempts to resolve the Greek debt crisis achieving only limited success, and a sudden weakening in the world bond market emphasising the funding problems that are affecting the entire bond market.

Portfolio Recommendations: Shaw Capital Management Korea. Independence of Central Banks. Economies virtually everywhere have been recovering for some months, the question is what to do post-crisis. For some, like Ireland, Iceland and Latvia, there is little option but severe and immediate public sector retrenchment.

For most however there is a choice: on the fiscal side cuts (or tax rises) now, or later spread over a long period. On the monetary side, continued printing of money or cessation and even reversal. In fact this is one of those periods when the ‘independence’ of central banks, that is their independent authority to set interest rates and the extent of money printing, is a disadvantage for the economy, all of which need at present careful coordination of monetary and fiscal policy.

 

At Shaw Capital Management we give you the information and insight you need to make the right investment choices. We look forward to working with you and being the open architects of your financial well being.

Every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor. Our philosophy is simple: almost every investor will achieve better long-term risk-adjusted results by working with a true open architecture advisor.

Before Shaw Capital Management South Korea launched the open architecture revolution, investors had to make the unhappy choice between selecting an advisor who was independent, but unsophisticated (the traditional pension and endowment consulting firms), or selecting an advisor who was sophisticated but had conflicting interests (global banks, trust companies, money management firms).

Today, virtually all investors faced with the challenge of managing a significant pool of capital can access open architecture advice.

 


 
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