In the news, Jun 30

HA commentary

“Organised crime” is legitimate business driven underground and criminalised by government legislation.

Killing Escalates Mexico Drug War

WORLD NEWS / JUNE 29, 2010

MEXICO CITY—A leading Mexican gubernatorial candidate was killed early Monday in a state bordering Texas, in the highest-level assassination of a politician here since President Felipe Calderón declared war on drug cartels in 2006.

The killing of Rodolfo Torre, who was seen as a shoo-in for governor in Tamaulipas, represents an escalation of the drug traffickers’ war against the Mexican state.

“This is an attack not only against one citizen, but against all society; an attack not just on one politician, but against all politicians and our political institutions,” Mr. Calderón said in a televised address.

http://online.wsj.com/article/SB10001424052748703964104575334942693439322.html?mod=WSJ_hp_mostpop_read

HA commentary

What was the Federal Reserve’s reassurances about a decline in real estate prices again? Didn’t Bernanke say in 2007 that there would be no impact on the broader economy? Review the Fed’s calls before the crisis to know this is nothing but MOPE
http://www.youtube.com/watch?v=9QpD64GUoXw

New York Fed probes Wall Street exposure to BP: sources

(Reuters) – The Federal Reserve Bank of New York has been probing major financial firms’ exposure to BP Plc to ensure that if the oil giant buckles under the costs of the Gulf oil spill, it won’t put Wall Street or the global financial system at risk, according to two sources familiar with the matter.

After poring over documents and asking banks about their exposure to BP over the past two weeks, the Fed found no systemic risk, and hasn’t asked firms to alter their credit relationships with BP, the sources told Reuters.

“The Fed gave banks’ exposure to BP a passing grade,” said one of the sources on condition of anonymity.

Beyond’s BP survival prospects, the Fed examination underscores market uncertainty about how the spill’s staggering clean-up bill might affect Wall Street, a fragile economic recovery, or the multitrillion dollar energy market.

BP until recently had stellar credit ratings and generated $30 billion of cash from its oil and gas production and trading over the last year, making it a golden counterparty for many financial firms that trade in energy, including the largest Wall Street banks.

http://www.reuters.com/article/idUSTRE65R5D620100628

HA commentary

“Construction industry reliant on government clients for 88% of its work.” That is a staggering figure. As the boom industry that led going into the crisis, it is unlikely that it will pick up until well after a real economic recovery has taken place. The recovery being currently experienced is not the recovery the sector wants or needs.  With global governments at risk of seeing sovereign debt markets collapse, there probably can’t be a worse sector to be in, unless if the company has large exposure to a region like Africa or Asia, or is active in a region in which Chinese investors are actively investing.

Grim outlook for construction firms

Antoinette Slabbert

Pretoria – The South African civil construction industry is under pressure and its future seems gloomy, according to FNB’s latest construction index.

FNB chief economist Cees Bruggemans says the civil construction industry is dependent on government clients for about 88% of its work.

With big projects for the World Cup soccer tournament behind it, and other projects being delayed because of funding problems, activity levels are on the decline.

What is more, a lack of management expertise and other problems within provincial and local governments is resulting in underspending on projects that have been budgeted for.

Sake24 recently reported that construction data service Industry Insight’s database shows 161 government projects that have been held up since the beginning of last year.

The rate at which projects were delayed, according to Industry Insight, doubled last year and the number of projects for which tenders were invited fell by a third in the first quarter of this year compared with the same period last year.

http://www.fin24.com/Business/Grim-outlook-for-construction-firms-20100630

Builders let down by government battling to keep head above water

BETH SHIRLEY Published: 2010/06/30 06:43:53 AM

SMALLER construction companies and contractors have been hardest hit by the government’s shelving of 161 construction projects.

These public sector projects are mainly at the municipal level and include the development of waterworks, stormwater drains, taxi routes and roadworks.

This is problematic considering these companies and contractors were relying on government infrastructure spending to cushion them from the effects of the economic crisis, since the private sector, which is also under financial pressure, has canned many major construction projects.

Elsie Snyman, CEO of Industry Insight, an information source for SA’s construction industry, says smaller companies and contractors listed on the Construction Industry Development Board’s registry were to benefit from the R846bn set aside by the government for infrastructure development this year .

“The contractors and companies were also earmarked by the government to expand the construction industry, stimulating employment.”

But, due to the inefficiency and mismanagement of government funds, particularly at the municipal level, construction projects were nonstarters, says Ms Snyman.

http://www.businessday.co.za/articles/Content.aspx?id=113233

HA commentary

To answer your question, Felicity: The SARB will be forced to cut rates again, maybe even twice (at a push), before starting to increase rates toward end 2011.

Which way interest rates?

Felicity Duncan | 29 June 2010 00:56

PHILADELPHIA – With a raft of economic news out last week, the question of whether or not the Reserve Bank will cut rates has become even more interesting than it usually is; here, in brief, is the case for either side.

http://www.moneyweb.co.za/mw/view/mw/en/page292678?oid=493425&sn=2009+Detail+no+image&pid=287226

HA commentary

What’s next? Golf equipment retailers and wholesalers?

How about investigating the one private company which on its own controls the entire money supply of South Africa, and on its own sets interest rates in the economy, in the process causing the business cycle?

Probe into bicycle price fixing

Jun 28 2010 21:12

Johannesburg – The Competition Commission has referred its findings of price fixing against 28 bicycle wholesalers and retailers to the Tribunal for adjudication on June 25.

“The firms face the allegation that they colluded to set the wholesale and retail prices of cycles and accessories,” the Commission said in a statement on Monday.

In addition, they allegedly excluded competitors from the market.

“Wholesalers sent retailers a price list with the wholesale price and the recommended retail price on a regular basis.”

The recommended retail price included a mark-up of 35% for bicycles and 50% for accessories, the Commission alleged.

In turn, the ceiling on mark-ups also determined the profit that retailers could make on cycles and accessories.

“Bicycle retailers colluded to exclude competitors like internet retailers from the market,” the Commission said.

The strategy used was to ask the wholesaler to sell to independent retailers at a higher price.

“This conduct is likely to harm competitors and consumers.”

The Commission has asked the Tribunal to levy an administrative penalty of 10% on the annual turnover of each of the firms involved.

http://www.fin24.com/Business/Price-fixing-in-bicycle-market-20100628-2

HA commentary

Increasing a nation’s productive capacity is the only way to increase real wealth. 

Jobless bring huge skills boon as suits get down and dirty

June 30, 2010

By Steve Matthews

Malcolm Barnes distributed snacks for 27 years before losing his job in October 2007. After applying unsuccessfully with food companies, he’s taken welding and machining classes and is looking for manufacturing work.

“If they are not hiring in vending, you have to change with the times,” said the 53-year-old Greenwood, South Carolina, high school graduate. “I am doing everything I can to upgrade.”

The 6.8 million Americans out of work for 27 weeks or longer – a record 46 percent of all the unemployed – are providing US companies with an eager, skilled and cheap labour pool. This is allowing businesses to retool their workforces, boosting efficiency and profits following the deepest recession since the 1930s, and contributing to a 61 percent rise in the Standard & Poor’s 500 index since March last year.

“Companies are getting higher productivity employees for the same or lower wage rate they were paying a marginal employee,” said James Paulsen, who helps oversee about $375 billion (R2.86 trillion) as chief investment strategist at Wells Capital Management in Minneapolis. “Not only are employees higher skilled, you have a better skill match. You have a more productive and more adaptive labour force.”

http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=5535038