Archive for category Business

The Truth About Rare Earth Supply And Demand

Posted by Oksana Grebenjuk in Business, Trading Markets on Ноябрь 9th, 2010

Mention rare earths these days, and you might be met with a confused expression by those frothing over how «the bubble» popped on short-lived Chinese quotas, and the bearish headline assaults that are more fiction than fact… The idea that supply outstrips demand is ridiculous, at best.

China wants to build 330GW worth of wind generators. They’d need 59,000 tons of neodymium for a project of that scale. That’s more than the country’s entire annual output. Essentially, they’d be cleaning out supply, leaving nothing for the rest of the world.

Without neodymium, the production of a whole host of technology — including medical devices like magnetic resonance imaging (MRI) machines — would be kaput for everybody else.

How can a fake bubble pop? How are we to believe a rare earth bubble exists? Wake up. What we have here is not a rare earth bubble. What we have here is a rare earth supply problem. One that cannot satisfy the demand of China, let alone the rest of the world…

There are reports of China’s plans to set up a strategic reserve of 10 rare metals to stabilize supply and keep prices afloat, alluding to the Middle Kingdom’s growing supply concern. And they’re looking to eventually outlaw all rare earth exports in the next 10 years, according to the Ministry of Commerce.  Read the rest of this entry »

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3 Companies That Have Virtual Monopolies In The United States

Posted by Oksana Grebenjuk in Business on Сентябрь 24th, 2010

Although monopolies are illegal under U.S. law, there are some companies that still have virtual monopolies in their industries. These companies dominate their respective markets and have no significant competitor. Their revenues in their markets dwarf those of the closest competitors.

1. ESPN

ESPN is the network for all things sports. The company has had challenges from CNN/SI and Fox Sports over the years but easily rebuffed their efforts. ESPN is a monopoly in the sports industry. It is the only 24 hour network devoted to all things sports. The network broadcasts in over 200 countries and is continually expanding. ESPN is so big that the company can buy whatever broadcast rights that it wants. Whatever ESPN wants, ESPN gets. ESPN wanted Monday Night Football and got it. ESPN wanted Sunday Night baseball and got it. ESPN owns the rights to Friday Night NBA Basketball. ESPN controls the more than 70% of all college bowl games.

2. Google (GOOG: 518.16, 2.06)

If you are searching for something on the Internet, then chances are you googled it. Google has over 65% of the search market. Its closest competitors own just 17% of the market. If you combined Microsoft and Yahoo, they would still control just 34% of the search market. Google’s global market share is often overlooked. According to Fortune magazine, Google owns over 90% of the market in non-mobile search worldwide. Yahoo and Bing combined barely make up over 1%. Google also has a lock on the growing smartphone market. The company owns nearly 96% of the mobile search market. Google doesn’t dominate the search market, the company owns it. Read the rest of this entry »

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When Average Earnings Are Not Representative

Posted by Oksana Grebenjuk in Business on Сентябрь 3rd, 2010

For various reasons, value investors are encouraged to use an average of several years worth of earnings as an estimate of a company’s earnings power. But when a company grows quickly (e.g. through the acquisition of a competitor), average earnings are no longer representative of earnings power. In such cases, other methods of estimating a company’s earnings may be more useful.

Consider Canam Group (CAM), a company that has gone on a buying spree in the last year or so. As competitors have been shutting down units to conserve cash, Canam has been strategically purchasing competitor plants at attractive prices. As many industries are currently at overcapacity, the benefits of these acquisitions won’t be seen for years. But the costs of these acquisitions (i.e. the cash used to finance the purchases) are seen immediately. How does one value the fact that future earnings will be higher than past earnings?

One method applicable to manufacturing companies is based on a company’s historical return on its fixed assets. If similar assets to the company’s current assets have been purchased, the company may be expected to generate the same type of returns on those fixed assets that it generated over the last business cycle. Of course, this exercise only results in a starting point for estimating future earnings. Adjustments may have to be made based on the age of the assets acquired, their quality, and a whole slew of other factors (e.g. geography).

When times are good, companies will often fall over themselves in bidding wars to acquire potential targets or business units. Value investors realize, however, that the best time for companies to acquire such assets is when business conditions are poor (financing in general is hard to come by, there is overcapacity in many industries, and sellers are desperate to raise cash), due to the great price discounts that are available. Read the rest of this entry »

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Europe’s Next Great Test

Posted by Oksana Grebenjuk in Business on Март 29th, 2010

European leaders may have bought some time by backing in principle a bailout for Greece, but even if the money is handed over, it will be no silver bullet for Greece or for the euro zone.

That’s because the euro zone’s problems are not limited to Greece and not solely related to government debt and budget deficits.

Right now, Greece’s debt burden is unsustainable. With government debt equivalent to more than the country’s annual output and the government paying close to 6.5% to borrow money, Greece’s debt burden is not just growing but accelerating dangerously.

The best a bailout can do is to buy time to reduce those interest rates to give the government time to slash its deficits and set the debt on a downward path.

Yet it is the euro zone’s second challenge that is at once more widespread and more intractable. That is the euro zone’s competitiveness challenge: structurally weak economies, in southern Europe and elsewhere, locked by a common currency to Germany’s low inflation rate and economic stringency. Read the rest of this entry »

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Finding Something to Like About April 15

Posted by Oksana Grebenjuk in Business on Март 18th, 2010

We’re smack dab in the middle of tax season, and I am done. I spent a couple of Saturdays gathering all of my bank statements and other documents, making post-closing general journal entries, and printing out financial statements to deliver to my C.P.A. for both our corporate and personal income tax returns. As my Canadian father would say, my books are now tickety-boo (translation: in perfect working order).

While I certainly don’t enjoy writing checks to the I.R.S., I have to admit that tax season offers an opportunity to take care of tasks that I’ve been putting off for the last 12 months. I keep my books fairly current throughout the year by downloading statements directly from my bank accounts into QuickBooks, but I always uncover some odd, creeping errors that need to be fixed at the end of the year.

I also seem to learn something new with each passing tax season. Our firm is structured as an L.L.C., and my husband and I are the only two members. As such, owners’ health insurance and medical expenses are not deductible business expenses. I swore at the beginning of 2009 that I was going to switch our high-deductible health insurance plan to one that qualified for a Health Savings Account. Like so many other administrative tasks, that one sat on the back burner and never got done.

As luck would have it, 2009 happened to be the year that my husband needed surgery to repair his eardrum. Poof! There went more than $3,000 in out-of-pocket medical expenses that could have been paid using pretax dollars set aside in an H.S.A. Ugh! At least our new plan is set up and in effect for 2010, so I won’t be making that mistake again. Read the rest of this entry »

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Do All Small Businesses Need a Mobile Strategy?

Posted by Oksana Grebenjuk in Business on Март 17th, 2010

At the Mobile Premier Awards — an international competition for mobile start-ups held last month at the Mobile World Congress — the message was clear: Web sites are old school, and mobile is a growing requirement for every industry and business.

Investors and entrepreneurs who judged and won at the M.P.A. competition were eager to offer tips and predictions to help all business owners — not just those with technology companies — prepare a mobile strategy. Here are some of their suggestions:

First, every company should try to become “visible” to mobile devices. “The idea is that if a consumer is looking for you on the run,” said Chetan Sharma, a mobile consultant who judged at the M.P.A. competition, “your info must be available in any format where they are looking to consume that information — or else you miss an opportunity.”

While smartphones can access most Web sites, the content in most sites isn’t coded to be read or found by people using devices on the go, with small screens and mobile browsers, search engines and operating systems. Smartphones, for example, can’t read Flash content, which many dance clubs and restaurants favor to create aesthetically pleasing sites. Read the rest of this entry »

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The Secret to Having Happy Employees

Posted by Oksana Grebenjuk in Business on Март 16th, 2010

About 10 years ago I was having my annual holiday party, and my niece had come with her newly minted M.B.A. boyfriend. As he looked around the room, he noted that my employees seemed happy. I told him that I thought they were.

Then, figuring I would take his new degree for a test drive, I asked him how he thought I did that. “I’m sure you treat them well,” he replied.

“That’s half of it,” I said. “Do you know what the other half is?”

He didn’t have the answer, and neither have the many other people that I have told this story. So what is the answer? I fired the unhappy people. People usually laugh at this point. I wish I were kidding.

I’m not. I have learned the long, hard and frustrating way that as a manager you cannot make everyone happy. You can try, you can listen, you can solve some problems, you can try some more. Good management requires training, counseling and patience, but there comes a point when you are robbing the business of precious time and energy. Read the rest of this entry »

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Starting Over at 55

Posted by Oksana Grebenjuk in Business, Favourites on Март 15th, 2010

AFTER 24 years as a marketing manager for Coors, Cinde Dolphin knew what was coming — Miller and Coors had just merged their United States beer operations, and hundreds of jobs were sure to be eliminated.

Worried that these youth-oriented companies might lay off an old-timer like her, Ms. Dolphin decided to take a buyout and relax. She sunned on the beaches of New Zealand, went whitewater rafting on the Yampa River in Colorado and saw friends and Broadway shows in New York.

But after a few months, she realized that she missed working. So at age 55, she began applying for marketing jobs, confident she would be quickly hired because of her Coors pedigree. “About four months into my job search, I realized I wasn’t getting many callbacks,” she said.

A Sacramento resident who has survived three bouts with cancer, Ms. Dolphin is not one to give up easily. She decided on an alternate tack — she would start her own business and thus join the nation’s fastest-growing group of entrepreneurs, those age 55 and above. Read the rest of this entry »

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