Yen, Dollar, Treasuries Gain as Stocks Drop on Growth Outlook

September 30, 2011, 3:28 AM EDT
By Shiyin Chen and Anna Kitanaka

Sept. 30 (Bloomberg) -- The yen and dollar strengthened, Treasuries rose, and stocks fell, dragging the MSCI All Country World Index to its biggest quarterly loss since 2008, on signs global growth is slowing. New Zealand’s bond yields jumped the most this year after the nation’s credit ratings were lowered.

The yen gained 0.9 percent to 103.52 per euro at 4:01 p.m. in Tokyo and the dollar climbed 0.7 percent to $1.3503 versus the European currency. New Zealand’s currency sank 0.9 percent and its 10-year yield increased 11 basis points. Treasury 10- year notes snapped a five-day drop. The MSCI All Country World Index slid 0.6 percent, taking its three-month decline to 17 percent. Standard & Poor’s 500 Index futures lost 0.7 percent. Copper erased an earlier slump, while oil gained a second day.

Concern that Europe’s sovereign-debt crisis will spread and the U.S. economic recovery is faltering has wiped out more than $9 trillion of value from global equities this quarter, driving investors to the relative safety of the yen, dollar and Treasuries. Data today may show U.S. consumer spending slowed and German retail sales fell, after industrial production in Japan and South Korea grew less than economists had forecast and a China manufacturing index shrank for a third month.

“People are still very uncertain about the macro-economic outlook at this stage and risk off prevails until greater certainty comes to light in policy response,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Expectations are now at a much more realistic level moving forward given the ongoing concerns about sovereign debt bailouts and lack of self-sustaining growth in major economies.”

Yen, Dollar

The yen climbed 0.2 percent to 76.65 per dollar. The Japanese and U.S. currencies are the best performers this quarter among the 10 tracked by Bloomberg Correlation-Weighted Currency Indexes, gaining 13 percent and 6.6 percent, respectively.

Japan’s factory output increased 0.8 percent in August from July, the trade ministry said in Tokyo today, missing the 1.6 percent median estimate of 28 economists surveyed by Bloomberg News. South Korean industrial production rose 4.8 percent from a year earlier, trailing the median 6.1 percent gain forecast in a separate Bloomberg survey. The won weakened 0.4 percent to 1,178.10 per dollar, completing its largest monthly loss since February 2009.

The New Zealand dollar fell to 76.41 U.S. cents, on course for a second weekly loss. The nation’s sovereign credit rating was cut by one level to AA by Fitch Ratings. Its long-term local-currency rating was reduced to AA+ from AAA and long-term foreign-currency rating cut to AA from AA+ by Standard & Poor’s. Its benchmark 10-year yield climbed 0.11 percentage point to 4.42 percent, the biggest increase since Nov. 18, 2010.

U.S. Spending

Treasury 10-year yields fell three basis points to 1.97 percent. Personal spending probably rose 0.2 percent in August, slowing from a 0.8 percent increase the previous month, according to a Bloomberg economist survey. S&P 500 futures expiring in December signal the U.S. stocks gauge may snap yesterday’s 0.8 percent gain.

Consumer and financial shares led losses on MSCI’s Asia Pacific Index, which pared its weekly advance to 1 percent. The gauge has dropped 16 percent since June, bound for its largest quarterly loss since the final three months of 2008.

Japan’s Nikkei 225 Stock Average closed less than 0.1 percent lower, while Taiwan’s Taiex Index rose 0.6 percent. The Hang Seng Index declined 2.2 percent in Hong Kong, where markets were closed yesterday after Typhoon Nesat battered the city.

China Growth

In Hong Kong, Gome Electrical Appliances Holding Ltd. plunged 15 percent after Credit Suisse Group AG lowered its rating on the Chinese appliance retailer. Evergrande Real Estate Group Ltd. and Wynn Macau Ltd. sank at least 15 percent.

More than half the global investors surveyed by Bloomberg predict Chinese growth will slow to less than 5 percent annually by 2016, according to results released yesterday. HSBC Holdings Plc and Markit Economics today said their purchasing managers’ index held at 49.9 in September, the third month of contraction.

Three-month copper added 1.6 percent to $7,290 a metric ton on the London Metal Exchange, reversing a drop of as much as 1.8 percent. Prices have declined 22 percent this quarter, the most since 2008. Cash gold rose 0.9 percent to $1,628.55 an ounce.

Oil pared its biggest quarterly decline since the three months ended Dec. 31, 2008. Crude for November delivery gained as much as 1.3 percent to $83.23 on the New York Mercantile Exchange before trading at $82.58. Futures are down 13 percent this quarter.

The cost of insuring Asia-Pacific corporate and sovereign bonds against non-payment decreased, with the Markit iTraxx Japan index dropping eight basis points to 198.5 basis points, Citigroup Inc. prices show. That would be the biggest decline since Sept. 16, according to data provider, CMA.

The Markit iTraxx Australia index fell four basis points to 210 basis points, Westpac Banking Corp. prices show, while the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased six basis points to 232, Royal Bank of Scotland Group Plc prices show.

--With assistance from Paul Gordon in Hong Kong, Masaki Kondo in Singapore, Richard Dobson in Shanghai, Monami Yui and Mariko Ishikawa in Tokyo, and Tracy Withers and Chris Bourke in Wellington. Editors: Darren Boey, Richard Frost

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net. Read More...

U.S. Economic Clout May Sink Palestinian Quest at UN Council

September 30, 2011, 3:37 AM EDT

By Flavia Krause-Jackson and Bill Varner

Sept. 30 (Bloomberg) -- Economics and political expediency may trump historical connections to determine whether two swing votes on the United Nations Security Council, Nigeria and Gabon, back the Palestinians’ bid for membership.

The two African nations were among the more than 100 countries that responded to Yasser Arafat’s 1988 declaration of independence by recognizing Palestine. This has led Palestinians to look to them for the ninth vote needed for approval by the 15-member council.

While the Palestinians have dispatched diplomats to the capitals of both nations to plead their case, they carry neither the economic heft nor the far-reaching influence of the U.S., which is working to block the Palestinians’ UN initiative.

“This is now realpolitik, pure and simple,” said Calestous Juma, a professor of international development at Harvard University’s John F. Kennedy School of Government in Cambridge, Massachusetts.

The Security Council is scheduled today to hold preliminary discussions about the Palestinian application for full membership, a process that the U.S. might delay for weeks or months.

Both African nations have reasons to disappoint the Palestinians.

“Their market is the U.S., so why would they want to spoil that relationship?” said Juma.

Palestinian Foreign Minister Riad Malki told reporters yesterday that they have secured eight votes, and that they are lobbying for more support for their bid for UN membership. Approval requires nine votes, though passage would be blocked by a promised U.S. veto.

Avoiding a Vote

The stakes are also high for the U.S., keen to avoid further fallout from having to wield its veto. Such action might enrage an Arab population already disappointed by President Barack Obama’s refusal to endorse the Palestinian quest for statehood.

“The Americans are desperate not to have it go to a vote,” said Robert Danin of the Council on Foreign Relations and a former aide to Mideast Quartet envoy Tony Blair, the former U.K. prime minister. “Having to veto is the nightmare scenario for them.”

Obama and Secretary of State Hillary Clinton pressed their opposition to the Palestinian vote when they met with Nigerian President Goodluck Jonathan last week in New York. Clinton repeated the message yesterday in talks with Nigerian Foreign Minister Olugbenga Ashiru in Washington.

U.S. Lobbying

“We have certainly made it clear to all of our friends that we want to see a return” to Israeli-Palestinian negotiations, Clinton said, standing alongside Ashiru. “Anything which is done which disrupts that or detours that is a postponement of the outcome we are all seeking.”

Nigeria has multifaceted ties with the U.S. Last year, Jonathan got Obama administration backing when he broke an unwritten rule that leadership of the country had to rotate back to a Muslim. Africa’s most populous country is roughly split between a mainly Muslim north and a predominantly Christian south.

Moreover, the U.S. and Israel have offered him counter- terrorism assistance to quell a surge in attacks by Islamic militants, which has become his foremost domestic priority after the Aug. 26 suicide car-bomb attack on a UN compound in Abuja killed 23 people.

Nigeria received $632 million in U.S. aid this year, making it the second-biggest recipient in sub-Saharan Africa after Kenya.

Oil Money

As Africa’s top oil producer, Nigeria supplies 8 percent of U.S. oil imports. U.S. imports from Nigeria totaled $30.5 billion in 2010, up 60 percent, and exports to Nigeria -- mainly vehicles, wheat and machinery -- totaled $4 billion, up 10 percent, according to the Office of the U.S. Trade Representative.

During last week’s General Assembly debate, when the Palestinian situation took center stage, Jonathan used his address to world leaders to welcome South Sudan as the UN’s 193rd member and didn’t mention the Palestinian issue.

Nigeria, which takes over the rotating Security Council presidency from Lebanon in October, has indicated its neutrality.

“Our arms are not twistable,” Nigeria’s Ambassador Joy Ogwu said in New York yesterday. “Every nation has its national position on this issue, on principle.”

Gabon is seated on the Security Council for the first time, giving it rare influence.

Cultivating Washington

For Gabonese President Ali Bongo Ondimba, whose first wife was American, cultivating ties with the U.S. has been a policy cornerstone since taking over power in 2009 following the death of his father, who was Africa’s longest-serving dictator.

Obama met with Ondimba in the White House three months ago, an Oval Office session the Gabonese leader called an “unqualified success.” While his father had only visited the White House twice in 41 years in power, most recently in 2004 under President George W. Bush, the new 52-year-old leader wasted no time traveling to the U.S. Last year, he met with Clinton in Washington.

Gabon’s exports to the U.S., almost entirely oil, increased 80 percent to $2.2 billion last year, according to the Office of the U.S. Trade Representative. U.S. exports to Gabon, mainly machinery, totaled $243 million in 2010, up 42 percent.

In May 2009, the U.S. dispatched a Navy ship to help train Gabonese naval officers in maritime security.

Other Security Council members also will weigh economics and history.

‘Huge Favor’

In the case of Colombia, Israel and the U.S. are among the government’s top weapons suppliers in its fight against the drug-fueled FARC, Latin America’s biggest and oldest insurgency. Israeli advisers also assisted in the July 2008 rescue of 15 hostages including politician Ingrid Betancourt.

Larry Birns, director of the Council on Hemispheric Affairs in Washington, a research group, said the Colombians would be doing the Americans and Israelis a “huge favor” by staying neutral.

Colombia has a pending free-trade agreement with the U.S. that has been stalled since 2008. Colombian Finance Minister Juan Carlos Echeverry said in an interview with Bloomberg Television yesterday that the U.S. would be making the “worst mistake” by not honoring a free trade agreement with the Latin American nation.

The U.S. has similar agreements already in force with 17 nations, including Mexico and Chile.

Bosnia Card

Unlike Brazil, the only other Latin American country in the Security Council, Colombia has set itself apart from its neighbors in the region and withheld recognition of Palestine.

Bosnia, another first-timer on the Security Council, recognized Palestine in 1992 when it also declared its own independence before plunging into three-year war. Its position today is complicated by the divisions along ethnic and religious lines. Bosnia’s Muslims and Catholic Croats tend to side with the Palestinians while the Serbs support Israel.

The U.S. also has close ties to Bosnia given its instrumental role in ending the 1992-1995 war there, which culminated in a 20-day negotiating session at the Wright- Patterson Air Force Base in Dayton, Ohio. The resulting Dayton peace accords, as the agreement came to be known, divided Bosnia into a Muslim-Croat federation and a Serbian republic.

-- Editors: Terry Atlas, Steven Komarow

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Business Loan: Making It Work for Your Company by Joseph Lizio

Capital (cash, money, dough, moolah) is an asset and like all business assets, it should be used in the most efficient manner – a manner in which it brings solid value to the business (return).
But, capital is a hard asset to acquire these days and thus, should your company be in a position to receive outside financing like a business loan – then that capital should be properly put to use as your business might not have this opportunity again in the near future.

In private equity deals (venture capital, angel capital), most investors will traunch their funds. This means that they will dole out their investment in chunks based on the investee (the growing company) meeting certain milestones in either customer acquisition or revenue generation.
This is done to essentially set up an option for the investor – where the VC or Angel can re-evaluate the deal at certain stages to determine if they want to continue to pour in money or to simply cut their losses.
Now, an option is only valuable when it is in play – take it out of play (like fund the entire amount up front) and the option becomes sunk (worthless).
While this seems to protect the investor, it can also work for a business seeking a business loan.
A business can fundamentally create their own traunch of funds – creating an option for themselves – an option that provides value, such as:

1) Getting Approved:

Allowing the business to request less initially making that request more likely to be funded. While your company may budget that it needs $100,000 in a business loan over the next three years – it does not need all those funds right now. Cut that request up into traunches and get those funds as needed.
This will also show your lender that you can properly manage their business loan and your operations and thus make future requests more palatable.

2) Cut Your Losses:

Measure the results of each traunch. If things are working out as planned, then request the next traunch. If not, scrap the plan and try something else. At least in this case, you will only be on the hook for a smaller amount then the total $100,000 that was planned.

3) Flexibility:

By traunching your funding, you offer your business much more flexibility.
What happens if your business meets its goals with only half the investment (loan) or only after one traunch. If that is all you have had to borrow, you have saved your company large fees and tons of interest over the life of the loan.
Typically, when businesses receive funding they really don’t need or can’t use right away, they tend to manufacture ways in which to spend those funds – ways that might not be in the best interest of the company’s long-term future (kind of like having that money burning a hole in your pocket).
Most business owners panic when they think they need outside money and the common assumption is to get as much as you can at a single time. But, this takes the option value out of the equation and could potentially create more future harm for your business.
You would not go out and purchase 20 brand new computers for just 2 new employees thinking that you will hire an additional 18 employees over the next three years. That would just be inefficient and wasteful.
Thus, why raise more money than your business needs right now?
The goal here is to ensure all your business assets are working overtime to bring in value and profits for your company. If you have too much of a single set of assets, then those assets are not being put to their best use (which is very un-business like).
Make your business loan work for you by treating it as the asset it really is.

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As retailers, we deal with many different personality types on a daily basis. Of course each customer is unique, but there is universal agreement that there are four basic personality types. These are the main customer personalities specific to the retail environment.

The Director

As the name implies, this personality is generally associated with demanding people. They are the take-charge types. They want what they want when they want it - and they want it now! In extreme cases they can be intimidating know-it-all's. Directors are generally not into small talk; they want the facts in order to make a decision as quickly as possible. If you try to get in the way of their goal they will plow through you and, as the expression goes, "take no prisoners." They don't care about anyone's interest other than their own. Their goals are very clear. They want the best possible product at the lowest possible price delivered when they want it - which is usually immediately.

How to Deal with a Director

Eliminate as much small talk as possible, lay out the facts, give your reasons why they should purchase something and make it brief and to the point. Generally these personality types have high self-esteem, almost to the point of being obnoxious about it. One of the most valuable tools you can use here is to compliment their direct style and decisiveness. The one thing you never want to do is to tell this personality type they are wrong or they are not listening to you. You must let them make their own decision. You can try to make suggestions, but make sure they are short and to the point. Remember, the Director gets turned off when you present yourself in any way as a roadblock to their goal. Remember: Never confront the Director -- stay out of their way!

The Analytical Personality

These types usually have professions that require accuracy and analysis. These would include jobs such as accountants, engineers or scientists, whereby they conduct research and analyze all the possibilities before making a decision. What motivates this type of personality when they come into a retail store to buy? Facts, details, product descriptions, Consumer Reports information... They want data. Analyticals read manuals, directions and the fine print. Like the Director type they are unaffected by small talk or the niceties that can accompany a retail store visit.

How to Deal with an Analytical

Give them facts and data. Do not make a statement unless you can back it up with pertinent information. If the product has detailed labeling, give it to them. There is one major advantage when it comes to dealing with the analytical personality: They have done their homework and/or comparative research. In many cases they will actually know more than a salesperson or owner, which makes them a valuable source of information. Don't be afraid to ask them why they came into your store, because there IS a reason. The biggest asset they have is all the research they have done about the product you are selling. And they have it neatly filed away in their iPad or Smart Phone so it can be easily referenced in seconds. Remember: Asking someone's opinion is considered the silent compliment.

The Relater (or Belonging) Personality Type

The Relater/Belonging personality type has a strong need to feel part of a group. I like to use the "my" test on this personality type. This means when a customer refers to "my accountant," "my doctor," "my garage," "my electrician," "my lawyer," or "my store," your store becomes part of their network. These people are usually three calls away from getting anything they want. They always know someone who knows someone who knows someone - the classic example of "three degrees of separation."

How to Deal with a Relater

The reason we refer to the Relater shopper as "Belonging Type" is because they take an ownership position in anything they do. The easiest way to sell to this personality type is to simply ask them, "What is your opinion of this product and do you think we should carry it?" Their response might be something like, "I think it looks good and I think you should carry it. I might like something like that. Let me see it." The bottom line is to include them in any way you possibly can, because they want to feel a part of the decision making process. A word of caution: The Relater can come into the store when the owner is not there and report back to the owner if someone isn't doing their job.
On the plus side, they are wonderful customers to have and a sensational source of never-ending referrals. Remember: Inclusion is the name of the game with the Relater customer.

The Socializer

Socializers are exactly as the name implies. They are outgoing, love to talk and love to make new friends. The Socializer wants to build a relationship with people who work in the store. This personality type places likeability as one of the most important buying criteria. If they don't like you they are not going to do business with you. Socializers want to build friendships. If you talk to them like an Analytical, with facts and figures, they will shut right down. As similar as they might be to the Relater, loyalty isn't as important to the Socializer. If they can develop friendships in several different stores then they will go to several different stores. Socializers love to receive and give compliments. However, they tend to be self-centered. They want to go to a store where they are made to feel important. This is the one group that retailers, owners, managers and salespeople relate to the most, because the majority of retailers will fit in this category!

How to Deal with a Socializer

The most important thing to remember is that it's not all about the merchandise; it is about the relationship. Always remember that the first thing you are selling is yourself. You can be giving merchandise away, but the Socializer won't care if they don't like you. Use compliments liberally. Do whatever you have to do to remember the names of these people. Don't lose sight of the fact that although they look at the shopping experience as a fun, social event, your goal is still to sell them merchandise. Remember: Keep the Socializer focused, yet be light enough to make their shopping experience fun and entertaining. The next time someone walks into your store, size them up and put them into one of these four personality categories (it's a lot easier than you think once you get the hang of it). You will then be better prepared to interact with each customer on a higher level, and increase your sales drastically.

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