The choice between buying a home and renting one is among the biggest financial decisions that many adults make. But the costs of buying are more varied and complicated than for renting, making it hard to tell which is a better deal. To help you answer this question, our calculator takes the most important costs associated with buying a house and computes the equivalent monthly rent.

Home Price. A very important factor, but not the only one. Our estimate will improve as you enter more details below.

How Long Do You Plan to Stay?. Buying tends to be better the longer you stay because the upfront fees are spread out over many years.

What Are Your Mortgage Details?. In addition to the interest rate and down payment, the calculator takes into account the mortgage-interest tax deduction.

What Does the Future Hold?. How much home prices, rents and stock prices change can have a large impact on your outcome. Unfortunately, these are some of the hardest things to predict. If you choose to rent instead of buying, the calculator assumes that you’ll spend your would-be down payment on stocks or another investment.

Taxes. Property taxes and mortgage-interest costs are significant but also deductible. The higher your marginal tax rate is, the bigger the deduction.

Closing Costs. You’ll have to pay various fees when you buy your home, as well as when you sell it.

Maintenance and Fees. Owning a home comes with a surprising variety of expenses that renters do not directly pay.

Additional Renting Costs. These are the costs on top of rent, such as the fee you pay to a broker and the opportunity cost on your security deposit. But these expenses typically have a negligible impact.

Methodology. The calculator keeps a running tally of the most common expenses of owning and renting. It also takes into account something known as opportunity cost — for example, the return you could have earned by investing your money instead of spending it on a down payment. The calculator assumes that the profit you would have made in your investments would be taxed as long-term capital gains and adjusts the bottom line accordingly. The calculator tabulates opportunity costs for all parts of the buying and renting situations. All figures are in current dollars.


Initial costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and other fees.

Recurring costs are expenses you will have to pay monthly or yearly in owning your home. These include mortgage payments, condo fees (or other community living fees), maintenance and renovation costs, property taxes and homeowner’s insurance. Property taxes, the interest part of the mortgage payment and, in some cases, a portion of the common charges are tax deductible. The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller.

Opportunity costs are tracked for the initial purchase costs and for the recurring costs. The former will give you an idea of how much you could have made if you had invested the down payment instead of buying your home.

Net proceeds is the amount of money you receive from the sale of your home minus the closing costs, which includes the broker’s commission and other fees, the remaining principal balance that you pay to your mortgage bank and any tax you have to pay on profit that exceeds your capital gains exclusion. If your total is negative, it means you have done very well: You made enough of a profit that it covered not only the cost of your home, but also all of your recurring expenses.


Initial costs include the rent security deposit and, if applicable, the broker’s fee.

Recurring costs include the monthly rent and the cost of renter’s insurance.

Opportunity costs are calculated each year for both your initial costs and your recurring costs.

Net proceeds include the return of the rental security deposit, which typically occurs at the end of a lease.

If you can rent a similar home for less than … $884 PER MONTH … then renting is better.

Digital currency is entering the mainstream
Digital currency is entering the mainstream

Digital currency bitcoin has crept out of the shadows of Silicon Valley basements and into the national spotlight. Venture capitalists — and billionaires — have bet more than $100 million on the virtual currency, which can be used to pay for vegan cupcakes and $100,000 electric cars.

The momentum of cost-efficient digital currencies threatens to disrupt the payments processing industry that has built billion-dollar companies fattened on processing lucrative credit card transactions and fees. For metro Atlanta, a national payments processing hub, that disruption could hit hard.

More than 60 percent of companies in the payment processing industry call Georgia home, including Total System Services Inc.(TSYS), Global Payments Inc., First Data Corp. and Elavon Inc. About 70 percent of all U.S. payments processed annually run through the state.

Bitcoin is a good alternative where credit cards don’t work well, such as overseas e-commerce, or to pay for low-value items. Bitcoin is a faster and less expensive way to move money overseas than wire transfers.

Bitcoin is not issued by a government or bank, but “mined” by high-powered computers that solve complex math problems. Of the up to 21 million bitcoins that can be potentially mined, more than 12 million are in circulation. Bitcoins are stored in “digital wallets” and can be used to buy products and services from more than 20,000 merchants worldwide. Bitcoins are bought and sold on virtual exchanges such as Bitstamp or BTC China.

If digital currencies catch on — and it’s a big if — the payments industry will be forced to pivot and embrace the new technology. For now, most are taking a wait-and-see approach.

“We have seen some interest from bitcoin people already, and I think there is going to be more,” said H. West Richards, executive director of The American Transaction Processors Coalition. “Wisdom will be shared and relationships will be formed between the digital currency people and the payment processors.”

Some of those “digital currency people” already call Atlanta home.

The largest bitcoin payment processor, BitPay, develops software tools that allow online merchants to collect payments over the bitcoin peer-to-peer payment network.

“Our goal is to be the First Data of bitcoin,” BitPay CEO Anthony Gallippi said.

BitPay, which is backed by British business magnate Richard Branson and Hong Kong billionaire Li Ka-Shing, recently raised $30 million in a round led by Index Ventures, with participation by Founders Fund, Felicis Ventures, RRE Ventures LLC, AME Cloud Ventures and Atlanta’s TTV Capital.

Bitcoin, while the most popular digital currency, continues to be buffeted by price volatility and controversy. In February, Tokyo-based Mt. Gox, one of the largest bitcoin exchanges, said it had lost 744,000 bitcoins to hackers. Mt. Gox closed, wiping out $480 million worth of bitcoins held by its customers.

Bitcoin has not gone unnoticed by Congress and the Federal Reserve.

While digital currencies “may pose risks related to law enforcement and supervisory matters, there are also areas in which they may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system,” former Fed Chairman Ben Bernanke wrote in a letter to senators last year.

Others are not so sure. Federal Reserve Bank of Atlanta President Dennis Lockhart referred to bitcoin as an “interesting little experiment.”

“In my mind it is very unlikely to become a substitute for the dollar,” Lockhart said at Mercer University in February. “It could be a flash in the pan; it could be something that sticks forever.”

Venture capital is bullish on bitcoin. Nineteen bitcoin firms in North America have collectively raised nearly $100 million in venture capital, according to Boston-based Aite Group LLC. Pantera Capital Management L.P. has formed a $147 million investment fund for bitcoin, according to Bloomberg.

Whatever the long-term prospects of bitcoin, digital currencies are having an impact on payment processors today. Bitcoin has added to the sense of urgency, and is causing financial institutions to feel a little less complacent about the current model, said Kevin Hagler, commissioner of the Georgia Department of Banking and Finance.

Bitcoin will add competitive pressure to improve the traditional payment processing systems, Hagler said.

“In fairness to the legacy systems, I think they were already working toward faster processing times, but digital currency may quicken their pace a bit,” he said.

An Atlanta venture capitalist who invests in fintech and payments companies concurs. The established payment processors are taking a wait-and-see approach to digital currencies, said Gardiner Garrard, managing partner at TTV Capital. The venture firm recently raised a $40 million Fund III from investors including TSYS and Global Payments.

Once bitcoins get market traction and user adoption, Garrard expects traditional payment processors to dive in.

“I think they will wait until there’s real validity and traction,” he said. “They’d rather pay up a little bit later [to get into the game)]than to take the risk now.”

Garrard doesn’t see digital currencies eliminating the credit card processing business. When credit cards emerged, they didn’t kill off checks, he said.

“What we’ve learned in the payments business is that more is better and it’s not necessarily a zero-sum game,” Garrard said.

Garrard views the payment processors as potential acquirers and partners, rather than competitors. By investing in venture funds, the payments behemoths are dipping their toes in the digital currency space and other technologies. Next, payment processors could partner with bitcoin-focused companies offering to resell services to their customers.

“If the digital currency gets mainstream adoption and regulations get buttoned up, then I think they’ll start taking steps to enter the market,” Garrard said.

One payment processing industry insider sees the bitcoin ecosystem as an evolution.

“I see the evolution being driven by the merchants, by the consumers, I see it being driven some by existing innovation happening in Silicon Valley, and I see it being driven by some innovation that is going to start taking place here in Atlanta,” the source said, requesting anonymity. “Add all of those things up, and the bitcoin investors may be pleased to know that the aspects of what they have invested in are indeed, at some point in the future, going to be used by the processors.”

BitPay’s Gallippi realizes the 800-pound payments industry gorillas are eyeing his turf. “They are starting to come to the conclusion that bitcoin is an efficient way to conduct a payment,” Gallippi said. “The longer they wait to support bitcoin, the more traction that’s going to give us … to take advantage of the interest there is in the market.”

If Gallippi is concerned about deeper-pocketed competition, he’s not showing it.

“BitPay’s advantage is that it has a three-year head start,” he said. “If others were to start building a platform now for bitcoins, they would go through the growing pains and scalability issues that we had, and we solved, a long time ago,” Gallippi said.

BitPay can compete on price and features, Gallippi said.

“Being a startup with a better technical solution and [leaner] operations, I think we can compete very well,” he said.

Gallippi sees the legacy players as potential partners, or even acquirers, when they decide to get into the game.

“It’s a possibility that someone like a First Data, or even Visa or American Express, could buy a bitcoin startup,” he said.

By Phil W. Hudson
Source: Upstart Bizjournals

A Boeing 747-8 freighter operated by Korean Air Lines at Incheon International Airport in Incheon, South Korea. Photo by SeongJoon Cho/Bloomberg
A Boeing 747-8 freighter operated by Korean Air Lines at Incheon International Airport in Incheon, South Korea. Photo by SeongJoon Cho/Bloomberg

Boeing Co. (BA) is in talks to sell 747-8 jumbo jets, the four-engine model that has struggled to attract buyers, to the commercial finance arm of China’s biggest lender, three people familiar with the matter said.

ICBC Financial Leasing Co. is considering a purchase of 747-8 freighters to place the aircraft with South Korea’s Asiana Airlines Inc. (020560), which flies 10 older cargo versions of the 747, two people said. The discussions are for four or five planes, with a total list value of as much as $1.8 billion, one person said.

A deal with ICBC Leasing, a unit of Industrial & Commercial Bank of China Ltd., would extend Boeing’s reach in the world’s most-populous country and provide a much-needed boost for its iconic hump-backed jet. The Chicago-based planemaker has won just one 747-8 order in 2014 as carriers shift long-range flying and airfreight to more-efficient twin-engine models.

Doug Alder, a Boeing spokesman, declined to comment on the ICBC Leasing talks. ICBC Leasing declined to discuss any negotiations with Boeing, according to a Beijing-based spokeswoman for the lessor who refused to be identified, citing company policy.

“We aren’t currently expecting to lease aircraft from a Chinese lessor,” a spokeswoman for Seoul-based Asiana, Lee Hyo Min, said by phone.

Boeing may announce the ICBC transaction next month at the Farnborough International Airshow in England, one person said. The event is this year’s biggest forum for aircraft introductions and sales.

Emirates Discussion

The world’s largest planemaker also is in talks with Emirates as the company seeks to keep the jet’s assembly line humming. Boeing has 51 unfilled orders for the 747-8, about three years of production, after slow sales prompted two production cuts last year to the current annual rate of 18 jets.

The 747-8 features a bigger wing and an elongated fuselage hump, the latest upgrade to a jet family whose commercial service began in 1970. The freighter version of the 747-8 debuted in 2011, followed by the passenger model, dubbed the Intercontinental, in 2012.

Cathay Pacific Airways Ltd., based in Hong Kong, has ordered 14 747-8s, Korean Air Lines Co. has bought 17 and Air China Ltd. has ordered five, according to Boeing’s website. While the freighter and passenger versions both retail for about $357 million, airlines and lessors typically pay less than list prices.

Jumbo Lessor

ICBC Leasing would be the first Chinese lessor to order the 747-8 as planemakers brace for a wave of purchases from the world’s second-largest economy. Last year, the company arranged China’s first lease of Airbus Group NV (AIR)’s double-decker A380 superjumbo jet.

China is poised to be the “most important single source of added growth” for Boeing and Toulouse, France-based Airbus as government planners chart aviation needs and economic growth for 2016 through 2020, Douglas Harned, a New York-based analyst with Sanford C. Bernstein & Co., said in a June 16 note to clients.

“The country has massively under-ordered airplanes to meet planned passenger growth due to the arcane ordering process tied to the country’s five-year plans,” Harned said. “We should be heading into a next wave of orders” even if economic growth is at the low end of forecasts.

ICBC Leasing, founded in 2007, owns and manages 337 aircraft, according to its website. The company, which also leases power, rail and construction equipment, reported assets of 150 billion yuan ($24.1 billion) as of June 2013.

By Julie Johnsson
Source: Bloomberg

Reposted from

Thailand’s electricity generation has so far kept pace with rising demand, up 44% in the last decade. Some 70% of it is from imported natural gas. To reduce this dependence, officials have been pushing green energy. The goal is to derive a fourth of its power from renewable sources by 2021, up from 9% currently.

With his Wind Energy Holdings operating two wind farms situated in the northern province of Nakhon Ratchasima, generating a combined 207 megawatts, and seven more projects with a total capacity of close to 650 megawatts being developed, Nopporn “Nick” Suppipat, 43, occupies a green sweet spot. Helped by generous government subsidies, Wind Energy is already profitable, notching up net profit of $25 million in 2013.

Suppipat is mulling an IPO next year to fund a regional expansion, possibly through acquisitions. In March a private placement of Wind Energy’s shares valued the firm at an eye-popping $1.2 billion. The deal propelled Suppipat, who holds a 65% stake, along with his key backer, Pradej Kitti-itsaranon (with 24%), into the ranks of the nation’s richest.

The son of dentists who sent him to high school in the U.S., Suppipat started dabbling in the stock market after his return. By age 21 he’d made his first $1 million and bought his first Ferrari but went on to lose it all. Selling his toys, he invested in a power project but had to unload it after the 1997 financial crisis. His next venture in magazine publishing fared no better, running up losses. In 2005 he decided to go back to power but this time latched on to wind energy.

Renewable energy firms have caught investors’ fancy and are lately enjoying a run on the Thai stock market. Shares of solar producer Energy Absolute have more than doubled since its IPO last year, boosting the net worth of founder Somphote Ahunai. Others are piling on; WHA Corporation, a warehousing firm founded by Somyos and Jareeporn Anantaprayoon, has announced a solar joint venture. Concretemaker Superblock, where Suppipat’s partner, Pradej, is an investor, is also diversifying into solar.

By Naazaneen Karmali
Source: Forbes

Europe's economy Still in the danger zone
Europe's economy Still in the danger zone
Europe’s economy Still in the danger zone

The latest economic growth figures from the European Union confirm that most of its member nations are struggling. It’s time to make some tough, painful choices.

FORTUNE — For the past year, we’ve been hearing that global growth, and the world’s equity markets, will get a major lift from a gradual recovery in Europe.

Indeed, Ireland and Portugal recently returned to the debt markets with well-received offerings, and the Greek government claims it will soon be in a position to issue bonds. Yields on sovereign debt remain remarkably low and stable. It’s indisputable that a mood of tranquility has returned to the eurozone.

But tranquility is not the same thing as progress, as the GDP figures released on May 15 by the Statistical Office of The European Union (Eurostat) alarmingly demonstrate. The 18-nation eurozone expanded by just 0.2% in the first quarter of 2014, half the figure economists were projecting.

Germany, as usual, was the leader, posting a gain of 0.8%. The problem spots are precisely the places where the comeback is supposedly underway: the beleaguered nations of Europe’s southern tier, as well as that tamed tiger, Ireland.
The latest figures confirm that most of these countries aren’t improving at all. Italy’s economy shrank by 0.1% in the first three months of 2014, matching the average of the three previous quarters. After expanding 0.6% in Q2 2013, France recorded zero growth. Portugal shrank 0.7%, following positive numbers in the preceding nine months. While figures weren’t available for Greece and Ireland in Q1, neither country is showing progress. Greek GDP dropped 2.5% in the final three months of last year, and Ireland limped ahead at 0.2%.

The lone nation demonstrating a sustained upward trend, however modest, is Spain. It grew at 0.4% in the first quarter of 2014 after pretty much flatlining for the last nine months of 2013.

Harald Uhlig, a German-born and educated economist at the University of Chicago, provides a balanced view of the current risks to the eurozone. For Uhlig, it’s crucial to understand the divergent courses taken by Germany and the southern nations since the euro’s introduction in 1999, and how those policies have led to the disparate economic outcomes in these nations today. “Inflation had always been a big problem in southern Europe,” he says. “Rates were high, and they also carried a big ‘risk premium’ because you couldn’t be sure that the separate central banks wouldn’t do something crazy, causing more inflation.”

The institution of a single currency in Europe led to the creation of a Bundesbank-like European Central Bank that then and now sets monetary policy in a rigorous, predictable fashion. “Rates dropped, and government and consumer spending exploded, driving high growth rates,” says Uhlig. What’s often overlooked, he notes, is that Germany didn’t join the party. “Germany was the ‘sick man’ of Europe. It suffered when the euro was introduced, in contrast to the southern countries.” Germany posted miserable GDP numbers in the early 2000s, while Ireland, Greece, and Spain all roared ahead.

Then, Germany made a turn that, in retrospect, seems astounding. Chancellor Gerhard Schröder (who served from 1998 to 2005) championed reforms designed to create a far more flexible labor market. “His model was the U.S.,” says Uhlig. “Before that, I kept hearing from leaders in Germany who didn’t want to reform, [saying] what you hear now in southern Europe: ‘If we only have more growth in the next five years, we’ll get rid of the unemployment problem.’ But growth never came.”

Schröder decisively lowered pension costs and unemployment compensation, and he gave companies more flexibility with hiring and layoffs. Schröder paid a heavy price for securing the most dramatic labor market reforms in modern European history. “He should have been rewarded, but he was brutally punished,” says Uhlig.

Schröder lost the chancellorship to Angela Merkel in 2005. The fruits of his reforms didn’t surface until around 2006, when the German economy emerged as the strongest player in Europe, as demonstrated by its resurgence from the financial crisis.

Big spending inflated wages in southern Europe, and productivity gains couldn’t keep up, meaning labor costs in Spain and France for each unit of autos or steel produced grew at a faster rate than in Germany or the U.S. The crash exposed the competitiveness gap in southern Europe and Ireland. Global customers bought less and less of pricey exports from southern Europe.

So, what can these nations do now? “It can be solved in one of two ways,” says Uhlig. “One is exiting the euro so that costs decline in the new currency compared to costs in other nations. The other is a combination of productivity gains and labor cost reductions. That would be the far better course.”

The issue, he says, is that the troubled nations have done little to unshackle labor markets along the lines of Schröder’s reforms of a decade ago.

Uhlig is especially concerned about the deterioration in France. “Europe used to have two great stabilizers, France and Germany. Now it has one. In France, the retirement age is too low, and companies are often run by former government figures and are too politically connected, so that it’s difficult for entrepreneurs to challenge entrenched companies.” He worries that the future of the eurozone is increasingly “on the shoulders of just one stabilizer, Germany.”

The severe recession and high jobless rates have not done nearly enough to lower labor costs. “I keep hearing from colleagues that labor costs have come way down in Spain,” he says. “But they’re still too high. The southern countries haven’t solved the problem of letting wage costs run far ahead of gains in productivity.”

Uhlig also notes that Europe’s period of economic calm hasn’t been put to good use. “It hasn’t been used for the types of reforms that are needed,” says Uhlig. “The attitude is, the euro-crisis is over, yields are still fairly low, and we don’t have to do anything.”

Uhlig is particularly concerned with potential triggers that might undermine confidence in the credit markets. “If Greece defaults, it could set off a contagion that would raise rates for the other nations, causing more defaults and a possible exit from the euro.” Uhlig would much prefer that the euro stay in place, and the problem be addressed by the Schröder method. Unfortunately, he says, the Schröder experience haunts Europe’s current leaders. “They fear they’ll end up like Schröder and the Social Democrats,” he says.

Southern Europe may have missed its chance. The best time to reform was when times were flush in the mid-2000s. It’s far more difficult to undo regulations and restrictions imposed over decades when economies are stalled and budgets are stretched to the limit, making a fiscal spending jolt highly risky.

Europe’s leaders keep careening from one “solution” to another, fixating on the German elections, then on asset quality reviews for banks, then on huge monetary stimulus programs to prevent potential deflation. They’re missing what really needs to be done. If Europe doesn’t make some tough decisions, the market will make choices for them. That would deliver a giant, cracking sound heard round the world.

By Shawn Tully
source: CNN Money

Vodafone UK Netflix on mobileVodafone Group Plc’s U.K. customers who sign up for high-speed mobile service will get a six-month subscription to streaming movies and TV shows on Netflix as the carrier expands into content.

The offer will be available starting in July for customers who sign up for Vodafone Red 4G voice-and-data plans that cost more than 26 pounds ($44) a month, Newbury, England-based Vodafone said today in a statement.

The company has similar deals with music streaming service Spotify Ltd. and British Sky Broadcasting Group Plc’s Sky Sports service, encouraging wireless customers to stream more content. Vodafone said this week that bundling high-speed access with content is driving higher data usage, a trend that may lead to higher monthly bills and help reverse service-revenue declines. Bloomberg reported Vodafone’s talks with Netflix Inc. (NFLX) April 17.

Service revenue, the sales Vodafone gets from selling voice and data plans, declined 4.4 percent in the U.K. last year from a year earlier. The company introduced faster fourth-generation service in the country last year, trailing the rollout of larger competitor EE, and plans to cover 91 percent of Europe with the technology by 2016.

Vodafone is planning to expand its content partnerships to faster growing “emerging markets,” Chief Commercial Officer Paolo Bertoluzzo said this week.

“What you’re seeing here in the U.K. is an experience that we are replicating everywhere else because we really believe that the content, video and music in particular are going to be a big driver,” Bertoluzzo said in a meeting with analysts.

Vodafone shares fell 0.2 percent to 204.25 pence at 10:04 a.m. in London. The stock has lost 17 percent over 12 months.

By Amy Thomson

Source: Bloomberg

Hewlett-Packard is headed for a third straight annual sales decline amid lackluster demand for its PCs, printers and servers (Photographer-Vivek Prakash-Bloomberg)
Hewlett-Packard is headed for a third straight annual sales decline amid lackluster demand for its PCs, printers and servers (Photographer-Vivek Prakash-Bloomberg)

Chief Executive Officer Meg Whitman, still struggling to turn around Hewlett-Packard Co. (HPQ), is opting for more job cuts, a move that boosted shares the most in six months.

After reporting an 11th straight quarter of declining sales, Whitman is propping up profit by paring as many as 16,000 more employees, on top of 34,000 already announced. While she has stabilized Hewlett-Packard after years of management upheaval and presided over a 39 percent share climb since taking over in 2011, the company is facing its third straight drop in annual revenue.

Consumers are buying fewer personal computers and printers as they embrace smartphones and tablets, and companies are opting to use more software via the Internet or building their own machines. By shedding workers, Whitman is lowering expenses, which will free up cash for investment in new businesses and enable her to report better profit.

“It clearly gives them more cushion to work on the revenue growth,” said Abhey Lamba, an analyst at Mizuho Securities USA Inc., who has the equivalent of a hold rating on the stock. “It’s going to be challenging to deliver that revenue growth.”

Profit excluding certain costs in the period ended April 30 was 88 cents a share and revenue fell 1 percent to $27.3 billion, the Palo Alto, California-based company said in a statement yesterday. Analysts had on average predicted profit of 88 cents and sales of $27.4 billion, according to data compiled by Bloomberg.

Seeking Growth

Hewlett-Packard shares gained 5.5 percent to $33.54 at 11:46 a.m. in New York, the biggest intraday increase since Nov. 27. Through yesterday, the stock had been up 14 percent so far this year, compared with a 2.4 percent gain in the Standard & Poor’s 500 Index.

Net income in the fiscal second quarter rose 18 percent to $1.27 billion, or 66 cents a share, from $1.08 billion, or 55 cents, a year earlier. The company’s one percent year-over-year revenue decline in the second quarter was the closest it’s come to growing since 2011.

The company’s 1 percent revenue decline in the second quarter was the closest it’s come to growing since 2011. Sales shrank 1 percent in the first three months of the year and analysts are predicting they will fall by the same amount again in the current period.

“We want to become a growth company — this is the second quarter of basically flat revenue,” Whitman said in an interview yesterday.“While you may say that’s not very exciting, it’s way more exciting than the historical declines we’ve had for the last eight quarters. The fact that we’re stabilizing revenue is encouraging and positions us well for the future.”

Final Cuts

The job cuts announced yesterday don’t reflect worsening demand for the company’s products, the CEO said on a conference call. Whitman said she doesn’t anticipate the need for further cuts. Hewlett-Packard had 317,500 employees at the end of October.

For the third quarter, Hewlett-Packard forecast that profit, excluding amortization, restructuring charges and other costs, will be 86 cents to 90 cents a share. That compares with the average analyst estimate for 90 cents.

Industrywide global PC shipments dropped in the first three months of 2014 as consumers in emerging markets opted for smartphones and tablets, while corporate demand helped slow the pace of decline. Quarterly shipments fell 4.4 percent to 73.4 million units, IDC said. Hewlett-Packard’s market share rose to 16 percent, making it the No. 2 vendor after Lenovo Group Ltd., Gartner Inc. said last month.

Real Gains

Second-quarter revenue in the personal-systems unit, which includes PCs, rose 7.4 percent to $8.18 billion, boosted by sales of business computers. Printing-division sales fell 4.3 percent to $5.83 billion.

One of Silicon Valley’s oldest companies, the manufacturer’s product range spans from PCs and home printers to the servers, networking gear and software used by corporations. Hewlett-Packard has fallen behind in mobile computing at a time when consumers have migrated to smartphones and tablets made by Apple Inc. and Samsung Electronics Co.

Hewlett-Packard’s enterprise-computing unit, which includes servers, had sales of $6.66 billion. Within that division, revenue from servers based on Intel Corp. technology rose 0.8 percent. Storage sales were down 5.7 percent, while networking revenue climbed 6.5 percent.

The enterprise-services division posted a 7 percent decline in sales to $5.7 billion.

“I don’t know that we’ve seen much that makes one feel that they can actually grow again,” said Rob Cihra, an analyst at Evercore Partners Inc. He has the equivalent of a hold rating on the stock.
By Ian King

Source: Bloomberg

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

If you believe that the stock market is a rational organism with a perfect track record when it comes to forecasts, then you should be extremely worried about China.

Fortunately, the market is often very, very wrong.
Chinese stocks have been lagging the rest of the world for some time now. The Shanghai Composite has fallen this year while the Dow and S&P 500 continue their record runs. The reason? Just about everyone and their mother believes that China’s economy is doomed for a big pullback, a proverbial hard landing.

Don’t get me wrong. There are reasons to be concerned. China’s real estate sector is undoubtedly frothy. And most economic data coming out of China is clearly pointing to lower levels of growth. But a hard landing? Many people I’ve spoken to think that investors are acting like Chicken Little (or maybe Dragon Little?) when looking at China.

“For the first time in a long time, I’m a lot less worried about a slowdown in China because everyone else is worried,” said Jim Oberweis, co-manager of the Oberweis China Opportunities Fund (OBCHX).

Oberweis concedes that China’s red hot property market needs to cool off and that there could be problems for banks. But that’s not a secret. He adds that investors are valuing China’s stock market as if a Lehman Brothers-esque 2008 event is on the immediate horizon.

So it’s hard to imagine a scenario where Chinese stocks fall dramatically further. If you’re worried about market bubbles and overpriced stocks, just look at the chart below. The P/E ratio for major Chinese stocks — as tracked by the iShares MSCI China (MCHI) ETF — is more than 50% below that of American and Japanese stocks.

Robert Howe, CEO of Geomatrix, a hedge fund based in Hong Kong, said investors are underestimating the willingness of China’s government to act aggressively to keep the economy humming along at a decent clip.

Howe said that one reason why China’s stock market has underperformed for the past few years is because the more legitimate worry was inflation. So China’s central bank could not afford to be so loose with its monetary policy. With China’s GDP slowing to 7.4% growth in the first quarter, there are calls for more stimulus.

And if China now goes into a quantitative easing mode like the U.S. and Japan to combat the worries of a real estate bubble bursting, then that will be viewed positively by investors.

“China will muddle through this. Beijing is very focused on the real estate debt problem,” he said. “But many companies that are well-positioned for growth are too cheap. You have babies being thrown out with the property bathwater.”

Howe said that two industrial companies that he thinks have been unfairly tarnished are HollySys (HOLY), an automation tech company similar to Honeywell (HON), and Hong Kong-listed China Water Affairs.

It’s also worth pointing out that even with China’s economy hitting a soft patch, it’s all relative. Growth of 7.4% is the envy of just about every other economy on the planet.

With that in mind, Hurst Lin, a Beijing-based general partner with venture capital firm DCM, said that for many Chinese in the country’s biggest cities, the economy doesn’t seem to be showing any significant signs of losing momentum.

“There has been hard landing talk about China on and off for more than two years,” Lin said. “It’s unclear if there is real reason to be concerned or if it’s just a case of the Western press saying it is so.”
Lin is a co-founder of Chinese media company — and CNNMoney Tech 30 component — Sina (SINA). He has invested in several other Chinese e-commerce firms while at DCM and says middle class Chinese consumers are continuing to spend pretty heavily, particularly on travel and luxury goods.

A DCM-backed Chinese travel company, Tunio (TOUR), went public last week in the U.S. and shares are trading nearly 15% above their IPO price.

Howe also thinks banking on the Chinese consumer for the long-term makes sense. He said that some Chinese online retail stocks are good bargains due to irrational fears that the soon to be public Alibaba will “crush everyone.” He owns car pricing information site Bitauto (BITA) and online real estate listing firm E-House (EJ).

As for Alibaba, Howe said he’d actually be wary of that stock once it debuts because it probably will be priced at a high valuation. He also said investors may underestimate concerns that Alibaba will face increased competition from the other two established Internet giants in China: Baidu (BIDU) and Tencent.

So where does China go from here? The days of double digit GDP growth are over. But that’s not necessarily a bad thing, especially since that breakneck expansion helped fuel the real estate bubble in the first place.

Peter Pham, managing director with the hedge fund Phoenix Capital and portfolio manager of the Prestige Global Growth & Income fund, said the Chinese economy is likely to keep growing just north of 7% — a little lower than what the government might like but hardly a disaster.

“China’s government recognizes that it has a major problem with the type and quality of the debt that exists and is moving aggressively to reverse that growth,” said Pham, who is based in Ho Chi Minh, Vietnam. “This is not considered a hard landing but more of a reflection on reforms and could be seen as sustainable.”

He added that a true hard landing would be GDP growth falling into the 4% to 5% range. That does not seem likely. Barring that, he thinks Chinese stocks will recover and that companies with ties to the still-emerging middle class are the best bets.

In other words, China may have learned (to borrow a phrase from Buzz Jr.’s latest movie obsession) how to train its economic dragon.

By Paul R. La Monica
source: CNN Money

Many of the 330,000 workers who would have benefited from the minimum wage work in the Swiss retail sector.

Swiss voters have defeated a proposal to introduce the highest minimum wage in the world.

The country’s election authority said a preliminary tally showed 76% voted against the proposal and 24% voted for it.

Labor unions had campaigned for months to win public backing for a minimum hourly wage of 22 Swiss francs, or nearly $25. Adjusted for the cost of living, it would be worth about $17.60 in the United States.
The Swiss government and business leaders had warned that the initiative would destroy jobs, hurt lower skilled employees and make it harder for young people and others to enter the workforce.

Switzerland is a wealthy country, enjoying above average rates of growth and employment and relatively short working hours.

But unlike many advanced economies, it does not have a statutory national minimum wage. Pay is set in negotiations between companies and individuals, or with employee representatives — sometimes across industrial sectors.

Swiss unions argued that it was a disgrace that 330,000 mainly young workers in one of the world’s richest countries don’t earn enough to support a decent quality of life. Many work in retail, hotels or restaurants.

The minimum wage would have meant raising the wages of about one in every 10 workers by an average of 15%. Campaigners said Switzerland could afford the additional cost — estimated at 1.6 billion francs, or about 0.3% of GDP.

Germany is planning to introduce a national minimum wage next year for the first time, at 8.50 euros an hour. That’s worth about $15 in the U.S.

Switzerland’s constitution allows popular initiatives to be put to a national vote four times a year, provided the organizers gather 100,000 signatures in support. In order to force a change in the law, an initiative needs to be approved by a majority of the electorate and the country’s 26 cantons, or districts.
Voters surprised many observers in February by approving limits on immigration despite warnings of damage to relations with the European Union and business.

A popular initiative to give shareholders more control of executive pay won clear backing from voters in March 2013, although a more radical attempt to cap top salaries at 12 times the lowest paid employee’s compensation was rejected by a big margin in November.

By Mark Thompson
source: CNN Money

GENEVA — A decade ago, Nick Hayek, chief executive of the Swatch Group, and Bill Gates, co-founder of Microsoft, introduced in New York a new kind of watch called the Paparazzi. It was presented as the pioneer of the so-called smartwatch, giving the wearer access to news, stock quotes and other data via Microsoft’s MSN service.

But the Paparazzi proved a flop. And the joint venture between the world’s largest watch maker and the software giant was broken off.

Since then, watchmakers have been biding their time. They have stood on the sidelines over the past year as consumer electronics companies like Samsung and Sony rolled out smartwatches that enabled people to read text messages and emails, and in some cases make phone calls and take photos, directly from their wrists.

Last week, Google introduced a new version of its Android operating system software made for smartwatches, amid speculation that Apple was also set to enter the wrist wars soon with a product that industry followers have already dubbed the iWatch.

Growing interest in smartwatches by consumers and technology companies might seem a perfect opening for the industry that really knows watches: the makers of fine Swiss timepieces. But for various reasons, none of the Swiss industry leaders seems committed thus far to combining diamond bezels with digital bits.

Even following Google’s announcement last week, Mr. Hayek sounded wary — and certainly not keen to revive the kind of alliance struck with Microsoft, which he said left Swatch with plenty of unsold Paparazzis.

The smartwatch products developed by Google and others, in Mr. Hayek’s view, raise several problems compared with traditional mechanical watches. The drawbacks, he said, include their limited battery life and the fact that they are “trackable” by the National Security Agency and other intelligence services.

“People don’t want these complications,” Mr. Hayek said during a news conference last week. Instead, he said, “watches remain a piece of jewelry.”

The watch industry gathers in Basel, Switzerland, on Wednesday for the weeklong Baselworld watch and jewelry convention. So if any surprise smartwatch announcements are imminent, that might be a logical forum.

So far, however, watch executives have been noting the price gulf between smartwatches that sell for hundreds of dollars, and luxury-brand mechanical watches that generally cost thousands — even if some of those same executives welcome the idea that products like Samsung’s Galaxy Gear, introduced last September, are making people focus more on wristwear.

“The arrival of Samsung and others will not hurt the luxury watch sector, and there is in fact room for everybody,” said Richard Mille, founder of the watch company that bears his name.

Mr. Mille drew an analogy with the car market. Electric engines and other technological advances, coupled with efforts by governments to limit speed and fuel emissions, had not reduced demand for gas-guzzling sports cars.

“With all these speed and other restrictions, it should have made it much harder to sell such cars,” Mr. Mille said. “But I don’t see that people have decided to stop buying Ferrari, Porsche or Maserati.”

About 1.9 million smartwatches were shipped worldwide last year, almost two-thirds of which already operated on Google’s Android system. That was up from 300,000 in 2012, according to research from Strategy Analytics, a technology consultancy based in Boston.

Matt Wilkins, director of Strategy Analytics, said the smartwatch market was “starting to take shape” with “huge scope” for growth.

Traditional watchmakers, however, say it is too soon to predict seismic changes for their part of the industry.

“It’s the young people of today who will decide tomorrow whether the traditional watch really is in danger or not – and it’s very easy to get that forecast wrong,” said Jean-Marc Jacot, chief executive of Parmigiani Fleurier.

As an example of a miscued forecast, Mr. Jacot said that “the arrival of the snowboard was supposed to kill traditional skiing, but that’s clearly not what’s happened.”

In fact, some watch executives contend that their super wealthy clients are reaching a saturation point in embracing new technologies — similar to the way they are looking to eat artisanal organic food amid concerns about agricultural industrialization.

“We’re arriving at a stage where people are getting tired of technological machines, because I think they are invasive,” said Philippe Léopold-Metzger, chief executive of Piaget. “If I go out at night or am invited to a dinner, I don’t take my phone with me.”

Christian Knoop, the chief designer of IWC, another watchmaker, said “people are seeking a counterbalance to abstract digital products and are instead fascinated by a product that is made in factory that has been there more than 140 years, by craftsmen who are sometimes from the second or third generation.”

Mr. Knoop, who previously designed aircraft interiors, consumer electronics and furniture, said that “people have really got a lot of trends wrong because however good the technology gets, there is still a lot of human behavior and psychology involved.” Headsets, for instance, offer “clear functional advantages,” he said, “but haven’t replaced the behavior of actually touching and using a phone.”

The watchmakers’ wariness may have something to do with their industry’s turbulent history in recent decades. In the 1970s, Japanese companies flooded the market with quartz watches that pushed the Swiss watch industry to the brink of collapse — including Swiss makers that unsuccessfully attempted to switch to the cheaper quartz timepieces.

But Mr. Hayek’s father then took over and merged two struggling manufacturers and revived the whole Swiss industry with the introduction of the inexpensive Swatch watch. The fashion frenzy generated by the colorful plastic Swatches in turn required the group to develop mass volume production, also making it the dominant player in watch component manufacturing.

These days, the Swatch Group has a broad product line that still includes its inexpensive Swatch brand but also luxury brands like Breguet and Blancpain. Last year, Swatch made its biggest acquisition to date by buying the watch and jewelry business of Harry Winston for $1 billion.

Given Swatch Group’s breadth, some other prestige-brand watchmakers say the company may be well poised to jump into the smartwatch segment.

“Swatch has got massive development potential, great labs, so I’m surprised they’re not somehow competing with Samsung,” said Mr. Jacot, the chief executive of Parmigiani Fleurier.

But Swatch is still smarting from its Microsoft experience. “We don’t try again to be the first one to go out there,” Mr. Hayek said.

Jon Cox, a watch analyst at Kepler Cheuvreux, a brokerage firm, said it was hard to see this first generation of smartwatches hurting Swiss watches that retail for more than $1,000 — which is 90 percent of the Swiss industry.

But in the longer term, Mr. Cox suggested that Swatch could change tack again if the second generation of smartwatches triggered a consumption boom.

“If the market takes up, you can bet Swatch will get involved,” Mr. Cox said.

Few other Swiss brands are likely to follow, though.

Jean-Claude Biver, a former Swatch executive who now heads the watches division of LVMH Moët Hennessy Louis Vuitton — which owns TAG Heuer, Zenith and Hublot — said the problem for Switzerland’s watch industry was not uncertainty over the growth of smartwatches but the fact that this nascent sector was incompatible with the marketing and production strategy that underpinned the luxury watch industry.

“It’s not surprising that almost nobody in this country is talking about the smartwatch,” Mr. Biver said, “because its development is fundamentally opposed to the big Swiss obsession, which is to keep control on Swiss-made production.

“We can’t talk about our craftsmen working by hand,” he said, “and at the same time talk about the electronics of the future, which has nothing to do with our line of business and Switzerland.”

By Raphael Minder
Source: The new York Times