Financial Communique » World Finances

Expectations of Johnson & Johnson for 2012 are pessimistic

Viliyana Filipova — Tue, 07 Feb 2012 23:13:46 +0000

In 2012 Johnson & Johnson, the largest company in the world of cosmetics, medicines and healthcare products, forecast profit weaker than expected, after announcing a 89% drop in net profit for the fourth quarter a year earlier. The deterioration of the results is due to exceptional costs of settlement of disputes. In the fourth quarter 2011 net profit fell to 218 million dollars, or 8 cents a share, from 1.94 billion, or 70 cents per share for the same period last year, said in a statement New Jersey based corporation. Company profit without one-off effects reached 1.13 dollars per share, which exceeded the median forecast of economists surveyed by Bloomberg, to 1.09 dollars per share. For 2012, the company forecast earnings of 5.05 dollars to 5.15 dollars per share – less than analysts estimated 5.20 per share. The effect of movements in exchange rates will reduce the company’s results by about 13%, the statement said. Executive Director of J & J William Weldon states that growth in sales suffered from the redemption of medicines, including Tylenol and implants.
“Everybody noticed the volatility of currency markets, so I do not think J & J exaggerate” the effect on sales, says Les Funtlindar, manager of Miller Tabak & Co. in New York. “There’s nothing scary, although I wish revenues are a little more exciting”.
The sales of J & J for the fourth quarter rose 3.9 percent to 16.3 billion dollars after the proceeds of pharmaceutical products for the period rose 6.7 percent to 6.09 billion dollars. Last year J & J won certificates for many drugs, including Zytiga to treat prostate cancer, Edurant against HIV, Xarelto for preventing heart attack and Incivo to treat hepatitis C.

Would the gold baloon burst?

Viliyana Filipova — Tue, 23 Nov 2010 11:16:26 +0000

The gold has appreciated by 24% this year and is about to celebrate its tenth consecutive year of growth because of increased interest of investors to it as an alternative to paper money and means of protection against inflation. The strong jump in price in recent years does not seem to interfere with speculators like George Soros and John Paulson, who actively increased their investment in gold. Gold occupies the largest share in investment funds managed by them Soros Fund Management and Paulson & Co. at the end of the third quarter. The exchange traded funds that bet on gold, have 2088 metric tons of gold which is approximately equal to its extraction from the mines in the U.S. for nine years. According to investment firm BlackRock is more official gold reserves of any country except the U.S., Germany, Italy and France. Meanwhile, Goldman Sachs forecast that the precious metals will be the most profitable assets next year. The rapid increase in gold prices over the past three years undertaken since governments and central banks worldwide, led by the U.S. Federal Reserve, money supply grew strongly in their efforts to cope with severe financial crisis. Significantly, gold has appreciated by 87% since September 2007 when the Fed started lowering interest rates and financial markets have begun to feel the effects of mortgage crisis. The broad U.S. stock index S & P 500 in the standing with 21% below their levels of September 2007. According to analysts of Euro Pacific Capital, which successfully predicted the gold price records in the last two years, its rapid appreciation will end when real interest rates become positive. They point out that instead the Fed print more money to stop the rise in real interest rates and stimulate the economy.
The base rate in the U.S., Britain, Canada, Switzerland and Japan is in the range from 0% to 1% from December 2008 onwards. For the appreciation of gold can help the decision of the Federal Reserve to inject another 600 billion dollars in U.S. financial system by June next year by buying government securities. The expectations for a new injection of liquidity in the U.S. dollar index fell 8.5 percent in the third quarter, its strongest decline for the past eight years. Through its first cash injection the U.S. central bank merged over 1.7 trillion. dollars through purchases of mortgage bonds and government securities. Gold has only income for changes in market price, unlike most other assets such as stock dividends and coupons on bonds. Its price, however, jumped to a record 1,424.60 dollars per ounce on November 9, shortly after the announcement of the new financial injection in the U.S. Other precious metals such as silver, for example, provide even better than gold this year. Silver has appreciated by 61%, and the price of palladium has risen by 72%. The strong performance of silver is due partly to the fact that it is regarded as a cheaper alternative to gold. Moreover, silver is used more actively in industrial production – about 50% of the demand comes from this sector, while gold it is a source of 9% of demand. This shows that the increasing price of silver could also reflect investor optimism about economic recovery.
George Soros, who won $ 1 billion through speculation in the British pound in 1992, called gold “the perfect bubble” during the World Economic Forum in Davos in January. “To buy when a bubble starts to inflate, it is prudent,” he said. According to him, deflationary pressures and the fear of inflation now are ideal conditions for the appreciation of gold. The gold price rose more than eight times in the 1976-1980 period, reaching a record $ 850 an ounce before plunging 67% to just 284.25 dollars per ounce over the next five years. This peak, adjusted for inflation, amounts to 2266 dollars an ounce today on the basis of the calculator on the website of the branch of the Federal Reserve in Minneapolis. According to the analysis of Euro Pacific gold price will jump to 1800 dollars an ounce in 2011. The price of the metal, however, may stop its rise, if the debt crisis subsides in Europe and China control the acceleration of inflation without harming growth.

Deficit of copper, lead and nickel on world markets

Viliyana Filipova — Tue, 12 Oct 2010 11:45:51 +0000

The aggregate supply of the metals copper, lead and nickel on world markets in the period 2010-2012 will be less than demand, according to a forecast of the French bank BNP Paribas. It is estimated that the bank this year, the shortage of copper on world markets will be 50 000 metric tonnes in the next to reach 400 thousand metric tons, but in 2012 will be reported a decline to 150 thousand tons. Copper production this year in the world is estimated at 18.75 million tonnes for 2011 are expected 19.45 million tons and in 2012 – 20.75 million tonnes of consumption for three years, according to experts the bank will accordingly be 18.8 million tons, 19.85 million tons and 20.9 million tons. The shortage of lead in world markets this year is estimated at about 17,000 tons, and the next expected shortfall of 20 000 t. In particular, production of lead, according to forecasts of BNP Paribas, in 2010 is 327 thousand . t, and next year will increase to 340 thousand tons, however, sought for this year will be 344 thousand tons and for 2011 – 360 thousand tons. The deficit of nickel on world markets this year is expected to be around 75 000 tons. On the other hand, sought after excess supply of aluminum in the global market by 2012 is expected to have a balanced picture.
Increased supply of zinc in the world, however, will have both this and next year, analysts predict by the French bank.

IMF will act more aggressive in monetary conflicts

Viliyana Filipova — Sun, 10 Oct 2010 15:09:08 +0000

The Managing Director of the International Monetary Fund (IMF) Dominique Strauss-Kahn is going to strengthen the role of the Fund to manage and resolve conflicts currency. While the heads of central banks and finance ministers from around the world gather for the annual meeting of the IMF in Washington, Strauss-Kahn said the IMF is the institution through which you can make progress in dealing with monetary problems. He added that the IMF will start publishing special reports that will highlight the links in the economy, then called for a coordinated initiative for stability by which to address global economic imbalances. The use of currency as a weapon is not a solution of weak growth and can further deteriorate the economy, warned the head of the IMF. “There is no local solution to the global problem,” he said. The meeting of the IMF launched on Friday amidst fears of an outbreak of the currency war, a term that was first used by Brazilian Finance Minister Guido Mantega last week. His remarks came after the reinforced expectations that more countries will resort to devaluation of currencies in the pursuit of higher economic growth. Tension in the currency markets are likely to dominate discussions between now and financial leaders from countries that are members of the IMF. Meanwhile, the governor of China’s central bank said that Beijing will stick to a gradual appreciation of the yuan, to avoid social turbulence. It was clear that the appreciation of Chinese yuan will not solve the problem of high unemployment in the U.S., in contrast to the widespread in the U.S. Congress opinion.
Countries with fixed exchange rates such as China, “calling for revenge,” warned, in turn, Canadian Finance Minister Jim Flaherty after yesterday’s meeting. Dominique Strauss-Kahn said that the last three years the IMF is the only institution which has repeatedly stated that the rate of the yuan is significantly undervalued. ”
IMF is working on new reports to show how monetary policy of one country can affect other countries. According to Strauss-Kahn said such analysis will help both parties involved to understand the consequences.
The reports will focus on U.S., China, Britain, Japan and the eurozone. They will show how monetary policy as the Federal Reserve affect capital flows to other countries. Washington-based institution also has prepared proposals to the group G-20, by which the growth of the global economy may increase by 2.5 percentage points over the next five years. Many developed countries like the U.S. has yet to pursue policies and reforms to reduce their dependence on government spending and increase their exports, the IMF said in its latest economic report. Meanwhile, developing countries like China still remain dependent on outside sales and undervalued currencies.

IMF warned for unstable global recovery

Viliyana Filipova — Sat, 02 Oct 2010 12:58:23 +0000

The recovery of the world remains fragile, and countries have done little to smooth out imbalances in the global economy, says the International Monetary Fund (IMF). In the first revision of its forecast in July, the Fund announced that growth in the first half of the year was slightly stronger than expected, as the world economy grew by 5.25 percent annually. Many developing countries have strong domestic consumption and investment creates new jobs. Growth in the developed world, however, is disappointingly weak, and Western economies fail to sufficiently recover from the recession, says IMF report. The Fund estimates that the global economy will grow by 4.8 percent this year and 4.2 percent in 2011, which revised its forecast slightly since July. General data conceal some important differences in the development of individual countries. The new forecast revised down expectations for growth in the U.S. with 0.7 percent this year and 0.6 percent in 2011, while the forecast for Germany has increased by as much as 1.9 percent for 2010 due to strong growth in German exports. Global recovery remains fragile because not yet sufficiently convincing adopted measures to rebalance the economy, says IMF. “Although many developing economies again enjoy strong growth, they remain largely dependent upon demand in developed countries,” the report said of the fund.
Weak growth in the U.S. again fueled speculation that the Fed will implement a liquidity injection – injecting money into the economy. IMF announced that such a step can be justified in the near future, if U.S. economic data continue to disappoint. “In the event that such risks materialize, the answer may include a guarantee of ultra-low interest rates for an extended period of time, new acquisitions of assets by the state and measures to support markets,” the report said. The danger of destabilizing trigger of deflation has increased in the U.S. and other countries struggling to intensify the weak economic recovery against the still existing financial problems, adds the fund.

Is debt management a good idea?

Viliyana Filipova — Fri, 01 Oct 2010 13:21:05 +0000

If you’re looking at your debts and wondering about the best way of clearing them, you might already have looked into the different debt solutions out there. You might have come across the idea of a debt management plan – and be wondering if it’s a good idea.
Some people like the idea of a professional debt management plan, and others don’t.
A debt management company can get in touch with your creditors for you and talk to them about accepting lower monthly payments, since you can’t afford the repayments you should be making to them. If it all works out, they’ll take your money every month and use it to pay a certain amount to each creditor.
They might also take some of that money for themselves as a fee for their services. So the question is: Do you personally think it’s worth paying a fee?
You can do all this yourself without even talking to a debt management company, but a lot of people would rather pay the fee and let someone else do it all for them – things like making sense of their finances, negotiating the lower payments, answering letters, distributing payments and renegotiating payments if that becomes necessary later on.
And a lot of people would just rather do it themselves. For some people, the thought of all that organising, communicating, calculating, distributing… is pretty alarming. But others are quite happy to do it on their own.
So basically it’s up to you to decide if you like the idea or if you’d rather handle things yourself.
Whether you go with a professional debt management company or not, just remember that making smaller payments to your creditors means you’re not upholding the repayment agreement you signed when you borrowed the money – and this can affect your credit rating.
Also, remember that interest means if you’re repaying something for longer, it can cost you more. So if you do it on your own, make sure you ask your creditors if they’ll freeze interest.
And finally, remember that your lenders don’t actually have to agree to any changes to the way you’re repaying your debts.
Check out this debt test to help you better understand your situation.

Jump of deals in mining and metals industry is expected

Viliyana Filipova — Sat, 04 Sep 2010 04:17:00 +0000

The value and number of transactions in the mining and metals industries are expected to soar due to global competition to secure raw materials, said in an analysis prepared by Mike Elliott of Ernst & Young. The number of transactions in the first half of 2010 is 20% (544) over the same period the previous year, while the value of transactions is 46% greater (40.6 billion dollars). “The activity of transactions has increased at the end of 2009 and continues gaining momentum,” added Elliott. In his analysis is that “expectations are diversified global investment in mining to show desire for new acquisitions. In this connection, we will probably witness a significant association of North American market, which in the first half of 2010, dominated in large deals and this will continue over the next 6-12 months”. While Australia was a leading investment destination in 2009, Canada leads the first half of this year, Latin America also demonstrate the growth of sensitive activities. Security of resources continues to be a driving force for growth of transactions in the production of metals. Other factors that contribute to the process are improved cash flow and availability of capital for transactions. As for raising funds for financing preferred shares remain a source of capital in the sector, says the analysis of Ernst & Young. Until last year, primarily large enterprises in the mining industry have taken their capital increase, this year, medium-sized companies are more active in raising funds from the market.
“Even some time we will continue to see a preference for self raising capital due to lack of options to bank loans, especially for medium-sized companies,” said Elliott. Nearly 60% of the credits for August are aimed at restructuring or expansion of existing funding lines are still found in the analysis.

New calm week is expecting leading markets

Viliyana Filipova — Mon, 23 Aug 2010 12:14:51 +0000

New week would probably passed as well as the previous – with a relatively limited number of corporate news, low liquidity and routine economic indicators. However, this poses its own risks and, as it is a low liquidity market movements can be quite sharp and dangerous. Late summer is typically a period in which investors monitor market movements from the beach – season completed reports, and most institutions have made an important decision for the economies are in summer vacation. It is the stagnation in the corporate sector is the main reason not to expect major turmoil in the market. During this week of U.S. data expected new housing market, which will be published tomorrow and Wednesday. Also on Wednesday are expected news on durable goods orders, and on Thursday are scheduled for initial unemployment data. Exactly they managed to stretch the market last week, pushed him down after a surprising increase in the requests for assistance. Most important news for the U.S. will come on Friday and are associated with preliminary data on gross domestic product for the second quarter. On the same day and is expected speech Federal Reserve Chairman Ben Bernanke.
In Europe, the week promises to be quite poor in key economic indicators such as data today are expected for PMI index for manufacturing and services in the euro area. Wednesday is a day when data will be published on the business climate in Germany, the week will end with preliminary data for inflation. More poor economic performance will be the week in the Asia Pacific region, except the trade balance of Japan in the calendar are missing key indicators for the leading countries. Only in Australia can expect more interesting news, due to parliamentary elections that were held over the weekend.

100-years bonds is the next challenge for the investors

Viliyana Filipova — Sun, 22 Aug 2010 12:26:25 +0000

The investors spend their money in bonds, are willing to invest money in almost anything you offer them market. In this situation, bankers are willing to undergo a test that claim – through the issuance of bonds maturing in 100 years, says the Wall Street Journal. Bonds with longer period as is considered very exotic, they may be issued only by the most powerful companies in the world – those that can be expected that the next century will be on the market. Hundred bonds were in fashion in the mid 90’s and the beginning of the century, when several companies were able to put such issues. Most of them were released in 1993, 1996 and 1997. This type of instruments are used quite rarely, because the issue should be offered a serious premium over 30-year bonds. The current record low historical interest rates lure companies to issue long-term debt. The reason for this is that companies can borrow cheap loans from banks and do not have to pay higher interest on bond issues. If issued, 100-year bonds will pay principal prior to 2110 – the year in which in all likelihood, today’s investors will be among the living. The main risk in these securities is that interest rates can jump so as to reset the bond face value. In view of market developments over the past decades, so it’s not sounds amazing. That is the reason for the skepticism, which sees the desire to place such term bonds.
“I think it would be a challenge,” said Marc Olin, head of corporate finance division in the United States of Fitch Ratings. “Given the volatility of world markets credit risk of 100-year bonds and expectations that at a time interest rates will probably increase will probably drive away investors,” he said. This did not stop some bankers insist that they must be placed with such financial instruments. They point out that currently the situation is excellent for the issuance of 100-year bonds of companies with high reputation. Among companies which have so far allowed the issuance of its 100-year debt, are Coca-Cola Enterprises, Anadarko Petroleum, Apache, Burlington Northern Santa Fe, Walt Disney, Ford, IBM and others. For most bonds coupon payment is between 7 and 8 per cent.

Big changes in financial reporting

Viliyana Filipova — Mon, 02 Aug 2010 11:34:16 +0000

The coalition of businesses, regulators, accountants, stock exchanges and NGOs launched an initiative to revise the standards for international financial reporting in order to prevent a new financial crisis, writes Financial Times. The crisis raises many questions about how to rely on corporate statements. Annual reports and financial statements of banks have been particularly criticized for not having warned investors about the risks that companies take. International Integrated Reporting Committee, using the accumulated discontent as a result of the crisis, wants to make a radical change in financial reporting. The proposed new reporting model will consider not only the company’s financial position, but will also include comments on leadership, corporate policy, payment, and issues related to environmental and social responsibility. Investors focus increasingly on issues such as the impact that could have climate change on the finances of a company. Among participants in the initiative are Nestlé, Aviva, EDF, HSBC, Tata, big four auditing companies PwC, Deloitte, Ernst & Young and KPMG, a number of universities, including Harvard Business School, and influential non-governmental organizations such as Global Reporting Initiative and Accounting for Sustainability Initiative.
It is crucial to the support of International Accounting Standards Board and U.S. Financial Accounting Standards Board, which sets rules for financial reporting in the U.S. and International Organization of Securities Commissions, which develops international standards for regulation of financial markets. The coalition wants to publish an integrated framework for global financial reporting model that will allow easy comparison of financial statements from different countries this year. The framework will be presented to the G20 in 2011. G20 have already supported the idea of establishing uniform rules for financial reporting and support of the G20 is considered crucial for their application.