Business Trends

Posts Tagged ‘economy’

Recession Creates New Holiday Shopping Trends

In Uncategorized on October 20, 2009 at 8:52 pm

Survey data from PriceGrabber.com, a part of Experian, reveals that the state of the economy is shaping new trends in holiday shopping. More than ever, comparison shopping is on the forefront of consumers’ minds, with 70 percent of consumers doing more research and comparison shopping online, compared with 38 percent last year.

Consumers are also crossing acquaintances (57 percent) and coworkers (53 percent) off their gift lists. Other findings from the PriceGrabber.com survey of 2,018 online consumers conducted from Sept. 24, 2009 to Oct. 12, 2009, reveal:

Consumers are cutting back — 53 percent plan to spend less

Many consumers have made a concerted effort to cut back over the last year due to the recession. A recent PriceGrabber.com survey revealed that these efforts will continue into the holiday shopping season and set the stage for new trends in holiday shopping. Fifty-three percent of consumers are planning to spend less than they did last year. Of the consumers who are planning to spend less this year, 48 percent reveal that one of the reasons that they are spending less is due to an increase in prices (necessities, gas, etc.), 45 percent cite lack of confidence in the economy, and 38 percent indicate making less money as a reason for spending less.

Shopping starts earlier to ease the impact of holiday spending — 22 percent start their holiday shopping in October

Cutting back on spending is not the only holiday trend being impacted by the recession. In past years, Black Friday (the day after Thanksgiving) has been the unofficial start of the holiday shopping season. This year, consumers are planning to start their holiday shopping long before Black Friday, with 22 percent of consumers starting their holiday shopping in October and 29 percent starting in November.

Gift lists are trimmed down to manage budgets — 57 percent are not purchasing gifts for acquaintances

Consumers are also making some significant cuts to the number of people on their holiday gift lists. When consumers were asked to compare this year’s gift list to last year’s, 57 percent of consumers revealed that they are not purchasing gifts for the acquaintances that they purchased gifts for last year. Fifty-three percent of consumers are not purchasing gifts for the co-workers that they purchased gifts for last year. When it comes to holiday spending this year, 36 percent of consumers expect to spend between $100 and $499, 28 percent plan to spend $500 to $999, and 30 percent anticipate a holiday spend of $1,000 or more.

Consumers are using more money-saving techniques — 50 percent shop at discount or outlet stores

This year, in order to meet holiday spending budgets, more consumers are utilizing money-saving techniques for their holiday shopping when compared with last year’s PriceGrabber.com survey, Holiday Consumer Spending Survey (2,641 respondents, conducted from Oct. 20, 2008, to Nov. 10, 2008). Fifty percent of consumers are planning to shop at discount or outlet stores this year, while only 43 percent did so last year. Twenty-nine percent of consumers are planning to purchase gifts for fewer people this year, while only 10 percent did so last year.

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Construction Market to Increase 11% in 2010

In Uncategorized on October 16, 2009 at 7:08 pm

McGraw-Hill Construction, part of The McGraw-Hill Companies, released its 2010 Construction Outlook, a mainstay of business planning for construction and manufacturing executives, which forecasts an increase in overall U.S. construction starts for next year. Due to improvement for housing from extremely low levels and broader expansion for public works, the level of construction starts in 2010 is expected to climb 11% to $466.2 billion, following the 25% decline predicted for 2009.

“The U.S. construction market in 2010 will be helped by growth for several sectors, following three straight years of decline that brought total construction activity down 39% from its mid-decade peak,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, addressing more than 300 construction executives and professionals at the 71st annual Outlook 2010 Executive Conference in Washington today. “The benefits from the stimulus act will broaden in scope, lifting not just highway construction but also environmental public works and several institutional structure types. With continued improvement expected for single family housing, after reaching bottom earlier this year, the overall level of construction activity should see moderate expansion in 2010.”

Highlights of the 2010 Construction Outlook:

•Single family housing for 2010 will advance 32% in dollars, corresponding to a 30% increase in the number of units to 560,000 (McGraw-Hill Construction basis).
•Multifamily housing will improve 16% in dollars and 14% in units, after steep reductions in 2008 and 2009.
•Commercial buildings will drop 4% in dollars, following a steep 43% drop in 2009. The weak employment picture will further depress occupancies, making it even more difficult to justify new construction.
•Institutional buildings will begin to stabilize after losing momentum in 2009. Square footage will retreat another 2% after sliding 23% this year. The dollar amount of construction for this sector will edge up 1%, helped by a growing amount of energy-efficiency upgrades to federal buildings and continued strength for military buildings.
•Manufacturing buildings will drop 14% in dollars and 3% in square feet, hampered by the substantial amount of slack manufacturing capacity.
•Public works construction is expected to rise 14%, given more wide-ranging strength across all project types.
•Electric utility construction will slip 3%, continuing to settle back after a record high in 2008.
 
The 2010 Construction Outlook was presented at the McGraw-Hill Construction Outlook Executive Conference in Washington, DC, which brought together top management from all parts of the construction industry including firms involved in building product manufacturing, architecture and design, contracting, engineering, industry associations and other industry professionals. At the event, Frank Giunta of Hill International and George Pierson of Parsons Brinckerhoff offered insights to an industry emerging from the crisis:

“The stimulus funds are meant to be just that, a stimulus, not the be-all-end-all answer to infrastructure financing,” said Frank J. Giunta, senior vice president and managing director of Hill International. “Both public and private sectors need to be innovative and rewrite the rules of project finance to address tremendous construction needs with minimal financing options.”

“The efforts of the federal agencies at transparency and their willingness to engage with private industry is refreshing,” said George J. Pierson, chief operating officer, Parsons Brinckerhoff. “We have to work together to meet the challenges of infrastructure and this economy.”

Related Links
McGraw-Hill Construction full report: 2010 Construction Outlook.
IBISWorld industry report: Heavy Infrastructure Construction in the U.S.

Majority of Companies Believe U.S. Economy Will Rebound in Early 2010

In Uncategorized on August 25, 2009 at 6:24 pm

New research from Deloitte issued today shows that although most major companies surveyed believe that the U.S. economy will start improving in early 2010, many of those same companies will lag behind the general economy when the rebound occurs. The reason: Too much focus on short-term, tactical actions and little attention to structural changes and strategic investments that are needed to support growth in the new business environment.

Approximately 55 percent of companies surveyed feel the U.S. economy will start showing signs of recovery in the first or second quarter of 2010; though 25 percent think relief won’t come until the third quarter or beyond.

Industry research firm  IBISWorld forecasts the US economy will decline by 3% in 2009, and will not return to its normal course until 2011. Believing unemployment will continue to rise into the first quarter of 2010, Dr. Richard Buczynski, chief economist at IBISWorld, believes it won’t be until 2011 that overall economic activity will again surpass 2008 levels.

After implementing initial cost cutting measures when the economy first began to tumble — such as reducing salaries, layoffs and plant shutdowns — many companies are now are confused about their next steps,” said Kelly Marchese, principal, Deloitte Consulting LLP. “We believe these businesses should stop focusing on short-term concerns and look at their business in this new reality. Businesses need to focus on areas such as talent, growth and structural change so that their business doesn’t just survive — it thrives.”

Deloitte also identifies the following three key economic phases and their timeframes that businesses need to recognize, and provides recommendations for corporate leaders to consider as they focus their business revitalization efforts during these uncertain times:
Phase 1: Over the Edge: companies were focused on shuttering their business, generating cash, and looking at tactical cost reduction. Survival was priority number one.
Phase 2: Lumpy and Bumpy: the current phase of the economic downturn where companies need to place the focus on structural changes, strategic investments and a resetting the profit model.
Phase 3: Growing into a New Reality: this is what companies need to prepare for; where the new economics, market realities and competitors emerge.

“Like any recession, this one will play out in stages and will vary by industry,” said David Brainer, principal, Deloitte Consulting LLP. “And, regardless of which stage your company fits, or the speed of change, you must move beyond tactical, reactionary moves and make structural changes needed to support growth. To make this shift, companies need to be proactive and prepare now for the new growth environment, whatever it may look like.”
As Deloitte sees it, every organization grows at its own pace, determined by factors as large as the global economy and as personal as its current balance sheet. But, every business must grow — the only question is how. Getting it right requires deep industry and business insights that help identify smart, well-timed investments. But, that’s just the beginning. Profitable growth also involves effectively assimilating and integrating those investments, something far too many companies fail to accomplish. It’s not just about strategy; it’s also about practical execution.

For more information and a copy of the Deloitte survey visit: www.deloitte.com/us/heretodaywheretomorrow

For IBISWorld’s economic forecast “Economic Crisis: When Will It End?” visit: http://www.ibisworld.com/recession2009/default.aspx

Only 1% Of Stimulus Money Helping 95% Of American Firms

In economy, Uncategorized on June 25, 2009 at 4:32 pm

Quick fact: the U.S. Census Bureau states that 98% of all U.S. firms have less than 100 employees, and approximately 25 million firms fall into that category. These firms employ over 55% of the private sector workforce and are responsible for over 95% of all new jobs created in America.

The American Small Business League (ASBL) has found of the $2.7 trillion that has been allocated so far to stimulate the national economy, only $21 billion, or less than 1% of the funds have directly gone to small businesses.

The remainder of the funds that were allocated to businesses wound up in the hands of the top 1% of U.S. firms. President Obama has promised to create up to 4.1 million jobs. Census data indicates the top 1% of U.S. firms have not created one net new job since 1977.

That aside, Los Angeles based industry research firm IBISWorld found that commercial bankruptcies nearly doubled in March of this year since last year’s figures.

“We can expect the current upward trend in business bankruptcy filings over the first half of the year to continue this year,” said George Van Horn, senior analyst at IBISWorld.

There is evidence to suggest the economic stimulus plan is actually harming small businesses. The Wall Street bailout bills were touted as being essential to increasing access to capital for small businesses. Some of the firms that received billions in federal tax dollars are actually cutting access to capital for small businesses. A story in BusinessWeek reported that JPMorgan Chase, one of the largest recipients of the bailout funds, reduced the flow of credit lines for small businesses.

Section 107 of the original Wall Street bailout bill gave the Treasury Secretary the power to waive any provisions of the Federal Acquisition Regulations (FAR) he chooses. Paragraph 9 (b) of the bill specifically mentions the waiver of “any provision of the Federal Acquisition Regulations pertaining to minority contracting” and the waiver of provisions pertaining to “woman-owned businesses.”

The Obama Administration is supporting a new bill in Congress that could dismantle existing federal economic stimulus programs for small businesses by changing the federal definition of a small business. The new definition will allow many of the nations wealthiest venture capitalists to take billions of dollars in federal contracts previously earmarked for small businesses.

In February of 2008 President Obama stated, “It is time to end the diversion of federal small business contracts to corporate giants.” To date, the President has refused to adopt any policy to honor that campaign promise. A series of federal investigations discovered that billions of dollars in federal small business contracts are being diverted to Fortune 1000 firms.

IBISWorld Announces High-Growth Sectors For Entrepreneurs & Investors

In business opportunity, Consumer Trends, economy, Uncategorized on June 22, 2009 at 11:52 pm

There is still money to be made despite the economic climate according to industry research firm IBISWorld. The company identified the leading start-up opportunities for entrepreneurs and investors to potentially make a profit in 2009 and beyond. The high-growth sectors are identified below:

 

 

1. Landscaping Services

Revenue forecast
2011 onwards.
Average annual growth of 4.5 percent from
Start-up costs $1k – $100k+ start up costs, with the upper end
relating to the purchase of equipment.

 

The aging population is driving demand in the landscaping sector, which is also benefiting from businesses, government and time-poor households outsourcing landscaping services.

Landscaping is an attractive start-up proposition because of low barriers to entry, as well as low initial capital requirements. “Many people can commence operations with equipment they already own, and there is no need for a formal office or additional staff,” noted Toon van Beeck, senior analyst with IBISWorld.

However competition is heating up for newer players to stand out, as established enterprises firmly plant their feet in the industry. All in all, strong growth will return around 2011, when income levels are expected to recover and job insecurity subsides. In order to stay competitive, investments—such as in earth-moving equipment-will likely be required, invariably driving up the cost to enter the industry.

 

2. Tutoring, Test Preparation, Driving Schools & Other Education

Revenue forecast
2011 onwards.
Average growth of 2.1 percent per year from
Start-up costs $4K – $75K start up costs, with the upper end
relating to purchasing an existing tutoring
business/operation from an established location

 

The popularity of online tutoring services is on the rise as families increasingly value low-cost, convenient applications they can use from home. Technology continues to evolve its way into the mainstream, and students are quickly adopting this integration into such online services. Growing consumer acceptance of tutoring and exam-preparation services is also moving this area forward. Online tutorial services were once relatively uncommon, however now they are an accepted – even sought-after – part of the education sector.

“In the current market we may also see people looking to expand their product offering to include relatively simple, short courses such as in first-aid and self-defence,” van Beeck predicts.

The initial cost of establishing a business in this industry is low, with most operators being able to rent premises on an “as-required” basis. There is also minimal need for capital expenditure on specialized equipment for tutoring and exam-preparation providers, apart from computers or other technological training resources. Competition in this evolving industry is currently moderate.

 

3. Fashion Design Services

Revenue forecast
2013 onwards.
Annualized industry growth of 6.3 percent to
Start-up costs $5k – $30k

 

While entrants require innovative design and creativity, demand for industry services from growing international markets, like China, will support this area in the long-run despite the current economic situation of 2009.

The beginning stages of any new fashion business will be challenging, but for the short-run IBISWorld expects a shift in designer focus towards producing fashionable yet affordable clothing, as budget-conscious consumers drive overall prices down.

IBISWorld anticipates an industry-wide recovery in the second half of 2010, with growth to ensue as consumer confidence is restored and fashionable clothing becomes more affordable. And while the sector has low-levels of concentration, competition is high and is increasing.

van Beeck advises new entrants to differentiate their services based on creative skills, quality, and witty self-marketing rather than through advertisement.

“In recent years, smaller, independent designers have been sprouting like never before and this has given the industry the ability to move forward despite the retail sector taking a big hit. This year won’t be easy, but we anticipate strong growth will return to the market and since entry barriers and start-up costs are relatively low – along with the growing popularity of online retail – we believe this industry warrants inclusion in the list,” said van Beeck.

 

4. Community Food Services

Revenue forecast
2011 onwards.
Annualized industry growth of 6.9 percent until
Start-up costs $500- $1,000 initial capital outlay, including gas and food supply

 

Historically high un-employment rates, combined with mass displacement and foreclosures, have seen a rapid rise in the need for emergency food supplies and community based food services. For new entrants, this $5.3 billion industry provides some profitable opportunities. Characterized by low barriers to entry, minimal capital requirements, and excellent growth prospects until 2011, community food services are both a noble and lucrative industry to enter amidst the gloom.

 

5. Vocational Rehabilitation Services

Revenue forecast
2013 onwards.
Annualized industry growth of 6.2 percent to
Start-up costs $500- $1,000 initial capital outlay, including gas
and food supply

 

Rising unemployment and displaced professionals will spur demand for vocational rehabilitation services this year, as the workforce becomes starkly competitive with the increasing amount of Americans vying for work.

“Getting people back to work will be a key priority for the government, so this industry will enjoy strong federal support for at least another year or so. Demand for industry services will be strongest in the regions most affected by the subprime crisis, particularly Calif. and Fla.,” advised van Beeck.

The recession will drive demand for training and return-to-work programs, and although the level of capital intensity is relatively low and industry assistance is high, it is a tougher field to penetrate than some of the other start-up options on this list. Industry contacts and counselling skills are particularly important.

 

6. eCommerce & Online Auctions

Revenue forecast
2013 onwards.
Annualized industry growth of 12.1 percent per
Start-up costs Online retailing start up costs at $12k to $260k

 

Americans are becoming thrifty with their wallets, and with the Internet offering an array of providers for every conceivable need, consumers are better able to research and compare more inexpensive options offering the greatest value.

This industry’s phenomenal growth is expected to continue for the next few years, facilitated by relatively low operating costs that lead to higher profit margins for operators.

Technologically, the industry continues to evolve and improve. Secure payment systems such as PayPal and effective web-based self-service solutions are improving business-to-consumer relations while boosting confidence and convenience regarding online shopping.

“This industry has low entry barriers and the cost of purchasing, establishing, and maintaining a website is very low, making it an encouraging prospect for new entrants. However, people considering setting up shop in this field are advised to consider that the costs of establishing, and maintaining a more advanced e-commerce site – with enhanced functionality and features – is much more significant. Setting up and maintaining databases can require hefty initial capital investment, and maintenance costs are of course ongoing,” van Beeck added.

 

7. Automobile Towing

Revenue forecast
2014 onwards.
Annualized industry growth of 2.7 percent to
Start-up costs $20,000 – $75,000 initial capital outlay

 

As consumers are cutting back on expenditures with their vehicles and putting off repairs, the number of breakdowns and volume of motorists needing emergency roadside assistance will increase, spurring demand for maintenance and servicing. Over the long-run, ageing fleets and high traffic volumes will invariably support the need for towing services, as commuters who opted to use public transport during tough economic times move back behind the wheel once the economic climate improves.

Further more, independent contractors are often able to provide better response times if they maintain a larger fleet of tow vehicles that can service a wider area. Public and private entities often find it more cost-effective to contract for services on a per-tow or per-repair basis, rather than maintaining a fleet of vehicles with the staff to operate them. This is becoming an even more attractive alternative, as the public and private sector attempt to reduce secondary labor costs – such as health insurance and pensions.

New entrants to the industry must become accredited by the state roads or transport authority, and pay regular license fees (combined cost of around $3000), as well as complying with regulations including driver log books and environmental stipulations. The cost of a tow truck ranges from as low as $20,000 for a used vehicle, to around $60,000, and operators also need to invest in tracking and communications.

 

8. Video Game Retail

Revenue forecast
2014 onwards.
Annualized industry growth of 11.4 percent to
Start-up costs $200,000+ initial capital outlay, primarily including
the cost of a shop front, stock and supplies

 

As a growth industry, video game retailing is a viable and lucrative business option in the current climate, as video games console a growing number of consumers spending more time at home. With low barriers to entry and modest initial capital requirements, this industry is well suited for potential entrants. Further, the ability to secure contracts from game wholesalers is relatively easy to facilitate, and the only barrier for new entrants is the cost of securing stock for initial sale.

 

9. Elderly & Disabled Services

Revenue forecast
2013 onwards.
Annualized industry growth of 7.1 percent to
Start-up costs $200k – $1 million+
$200k would be the absolute lowest – new entrants need to be willing to invest in nursing
staff (who will need to work 24 hours), as well as considerable amounts of medical
equipment and mobility-assistance machines, among other expenses, driving up costs.
This can be recouped fairly swift as long as occupancy is high enough, but any entrant
would need to be cashed-up or willing to borrow heavily in a tight credit market.

 

Growth and demand is steadily rising in this field, and it is a trend IBISWorld expects to continue for the foreseeable future, as the baby boomer generation approaches retirement age – spurring renewed demand like never before for age-specific services.

“This is supported by the fact that establishment growth is considerably stronger among non-employers, with annualized growth of 8.3 percent over the current period, as opposed to 3.3 percent among employers,” explained van Beeck. Government grants could be drawn upon to establish new industry entities – bringing down start-up costs – which are still significant since operators need to invest in and often modify premises, hire qualified nursing and auxiliary staff, and seek specialized medical equipment.

“Rising federal government funding, the rise of age-related issues, and an emphasis on caring for people with disabilities (such as the New Freedom Initiative), make this industry highly prospective. Entry barriers are low, and tax concessions and rebates are available for non-profit organizations. Currently, 86 percent of industry players operate without having to pay taxes – a significant incentive.

Recession-Weary Americans Spending Less On Healthier Foods

In Consumer Trends, economy, Uncategorized on June 16, 2009 at 7:50 pm

Almost half (46 percent) of Americans are reluctant to spend more on healthier versions of food, the United Soybean Board’s (USB) 2009 Consumer Attitudes about Nutrition survey reveals. This is not for lack of interest: Of those not willing to spend more, 52 percent confirm the reason is financial. However, nutritious foods don’t always come with a hefty price tag.

According to the sixteenth annual research study, 87 percent of Americans express concern about the nutritional content of the food they eat, a number that reflects Americans’ interest in healthier foods. While consumers juggle nutrition and economic value, 88 percent still consider nutrition important when purchasing foods at the grocery store.
Within price constraints, Americans are taking greater control of their health by choosing functional foods that provide specific health benefits. According to Packaged Facts’ Functional Foods and Beverages study, U.S. retail sales for functional foods totaled $31 billion in 2008, an increase from $26.9 billion in 2006. Soymilk faired especially well in sales, although controversy surrounding soy and estrogen may start to cause a decline in demand for soy-related products. Still, 84 percent of Americans rate soy as healthy, up 25 percentage points over the last 12 years. In fact, one-third of Americans purchase foods specifically because they contain soy.

Pet-Related Businesses Thriving

In Uncategorized on June 15, 2009 at 9:12 pm

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LOS ANGELES – Jun. 15, 2009 – Despite an ailing economy, pet owners are showing they are more than willing to splurge when it comes to the health and happiness of their animals. According to industry research firm IBISWorld, the pet business is expected to generate $51.6 billion this year, an increase of 1.3 percent from 2008, with trends in health and nutrition altering the market.

Veterinary services are forecasted to grow the fastest, at an average annualized rate of 4.3 percent in the next five years—accounting for an estimated $22.3 billion in revenue this year.

“Pet healthcare is a big business, as awareness in health is driving growth in this area” said George Van Horn, senior analyst at IBISWorld.

Veterinary practices are now expanding their range of services in order to cater to the health-related needs of animals. Chiropractics, ophthalmology, dentistry, and dermatology, to name a few, are becoming more readily available.

Pet Food production can expect steady growth in the next five years, and is projected to generate approximately $15.2 billion this year. This sector is also being affected by and adjusting to trends in natural and organic products. In recent years, over half of all pet-owners have shown concern in what their pets are eating, causing a greater shift in demand for premium pet food—ranging from breed-specific brands, to weight-loss diets, to special or natural-ingredient foods claiming nutritional benefits.

 

The Pet Grooming and Boarding sector, expected to generate $2.69 billion this year, is comprised primarily of pet-care, training, and pet-sitting—all of which are experiencing growth within the industry. Such practical services accommodate convenience to the increasingly busy American lifestyle, and pet stores are starting to incorporate these services in recognition of this growing need. For instance, PetSmart offers “Doggy Day Camp,” an indoor facility where owners can drop their dogs off seven days a week to pet-loving professionals.

 

Pet stores are expected to generate revenue of $11.45 billion this year. The majority of their in-store revenue comes from pet food, pet supplies and medicine. Live animal purchases contribute the least in sales, and this will continue its decline as companies become socially responsible in response to ethical concerns surrounding puppy mills, as well as overpopulation issues of homeless animals in shelters. Major pet store retailers now affiliate themselves with organizations that help dogs and cats with adoption. For instance, PETCO now hosts an in-store adoption center, introducing the philosophy “Think Adoption First.”  

 

In 2009, the population of dogs and cats as pets is approximately 169 million, which has increased roughly 2.4 percent since last year. Of those, 18 percent of cats and 10 percent of dogs have been adopted from animal shelters.

 

 “Americans consider their pets as members of the family, making businesses that cater to our four-legged friends a stable, growing market,” said Van Horn.

About IBISWorld, Inc.

Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every U.S. industry.  With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions.  Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide.  For more information visit www.ibisworld.com or call 1-800-330-3772.

 

Study Show Global Companies Still Failing to Report Strategies and Potential Impacts From Climate Change

In Uncategorized on June 3, 2009 at 4:49 pm

 Investors Call on SEC to Take Steps to Improve Company Disclosure

Climate change-related disclosure continues to be weak or altogether nonexistent in SEC filings of global companies with the most at stake in preparing for a low-carbon global economy, according to two major studies released today by Ceres, Environmental Defense Fund (EDF) and the Center for Energy and Environmental Security (CEES).

The reports’ findings highlight the need for the Securities and Exchange Commission (SEC) to respond to repeated investor requests for formal guidance on climate-related disclosure companies should be providing in securities filings.
“These findings are a clarion call for quick SEC action to require better climate risk disclosure from publicly-traded companies,” said Mindy Lubber, president of Ceres and director of the Investor Network on Climate Risk.

“Climate change is a bottom line issue and investors have a right to know which companies are best positioned for the emerging clean energy global economy.”
“Corporate climate disclosure falls far short of what CalPERS and other investors need to carry out their fiduciary duties,” added Anne Stausboll, chief executive officer of the California Public Employees’ Retirement System (CalPERS), the nation’s largest public pension fund and one of 18 investors that petitioned the SEC in fall 2007 to issue climate disclosure guidance.

“We call on the SEC to ensure that information regarding climate change effects, including regulatory and physical impacts, are accessible and delivered to investors.”

The two new studies – an in-depth look at SEC filings in 2008 as well as a multi-year longitudinal study – show companies are seriously deficient in meeting the needs of investors:

 The study found overall limited disclosure: 59 of the 100 companies made no mention of their greenhouse gas emissions or public position on climate change; 28 had no discussion of climate-related risks they face; and 52 failed to disclose actions and strategies for addressing climate-related business challenges. Even more telling, the very best disclosure for any of the 100 companies could only be described as “fair,” and only a handful of companies achieved this ranking.

Reclaiming Transparency in a Changing Climate by CEES, Ceres and EDF reviews over 6,000 SEC filings by S&P 500 companies from 1995 to 2008. While the study finds some modest improvement in climate risk disclosure since 1995, in 2008 75% of annual reports filed by S&P 500 corporations failed to even mention climate change and only 5% articulated a strategy for managing climate-related risks. Available at www.ceres.org

Climate Risk Disclosure in SEC Filings finds that while some climate related disclosure was common in the electric power, coal and oil & gas industries, most filings in these sectors lacked the level of detail that investors require. Many companies in the insurance and transportation sectors failed to provide any disclosure on climate-related risks and opportunities whatsoever.

“While disclosure among companies with high exposure to climate risk is increasing incrementally, the vast majority of companies in this study have still not quantified for investors key impacts to their business. Companies in certain industries like utilities have disclosed qualitative information on regulatory risks related to climate change, but very few of the 100 companies studied disclosed the physical risks, business risks, and litigation risks they face,” said Beth Young, senior research associate at The Corporate Library.

“Transparency and accountability are the hallmarks of a fair marketplace,” said Fred Krupp, president of the Environmental Defense Fund. “As the nation responds to the challenges of global warming, investors have a right to know which businesses are forging innovative solutions for the Twenty-First Century and which are lagging behind. The Securities and Exchange Commission must do its part to reclaim a fair marketplace that protects the interests of all investors from Wall Street to Main Street.”

Reclaiming Transparency in a Changing Climate finds a troubling pattern of silence on climate-change-related issues in filings across major sectors of the economy.

“To effectively build the new energy economy, investors need to know who’s planning for the future and who isn’t,” said Kevin Doran, co-author of the report. “Investors should not have to guess at the meaning of corporate silence.” Based on review of over 6,000 10-K filings spanning more than a dozen years, the report finds:

“Despite the clear imperative for prudent oversight, the SEC has failed to protect investors from enduring inadequacies in corporate disclosure concerning the material risks and opportunities posed by climate change.”

The study assessed climate risk disclosure for three broad categories using the Global Framework for Climate Risk Disclosure as a guide. The categories studied include:

(1) emissions and climate change position
(2) risk assessment
(3) actions to address climate risks and opportunities.

Specific key findings for the five sectors studied include:

Electric Utilities: Disclosure was widespread but minimal. None of the 26 companies studied achieved a “Fair” rating on disclosure of emissions and climate change position, only 3 out of 26 companies (12%) ranked “Fair” on climate risk assessment, and only 2 out of 26 companies (8%) provided “Fair” disclosure of actions to address climate change. Nevertheless, the electric power sector ranked higher than the other sectors and had three of the highest disclosing companies in the study — AES, Xcel, and PG&E.

Coal: All six coal companies surveyed included some disclosure of climate change issues in their 10-K filings, though only one achieved a “Fair” score in any of the three categories analyzed. Coal companies’ strongest disclosure was in the area of risk assessment; five of the companies provided disclosure in this category that was rated “Limited” or “Fair.” Rio Tinto provided the best disclosure, including valuable information on emissions, while Yanzhou Coal Mining Co. performed the worst overall.

Oil and Gas: The majority of the 23 companies studied provided some disclosure on climate risk assessment, but disclosure was weak with none ranking “Fair” and 22 out of 23 (96%) scored as “Limited” or “Poor.” Twelve out of 23 companies (52%) provided no disclosure on actions to address climate change, while 17 out of 23 companies (74%) disclosed no information on their emissions or climate change position. Apache, Exxon Mobil and Anadarko were noted for particularly weak overall disclosure, while Shell scored best across the board.

Transportation: Only 5 of 19 (26%) disclosed their emissions or their climate change position, and none were ranked as “Fair” for this disclosure. General Motors was the only company to provide information on past emissions from its operations, while not a single company disclosed emissions associated with vehicle use. More companies provided disclosure on climate risk and actions to address climate change; however, the disclosure was weak with only 3 companies scoring “Fair” on climate risk assessment and 2 scoring “Fair” on their actions to address climate risks. Honda, Daimler and General Motors scored the highest overall.

Insurance: Although prudent risk assessment is the basis for a viable insurance industry, the 27 companies studied in this sector provided the least disclosure compared to other sectors. Eighteen (67%) had no mention of climate change or related risks anywhere in their SEC filings; 24 out of 27 companies (89%) omitted disclosure on actions to address climate change, despite the wide range of opportunities for new, climate-related insurance products. The handful of companies that did provide more informative disclosure — Swiss Re, Munich Re and Zurich Financial — were all non-U.S. companies.

The Corporate Library report concludes that, despite the clarity of climate science and the host of policies being enacted to combat global warming’s ill effects, climate-related disclosure in SEC filings still falls short.

Furthermore, climate risk disclosure in SEC filings is insufficient to meet investors’ needs largely because the SEC has failed to take actions to highlight its importance. Although pressure from investors has clearly had some effect upon companies’ disclosure practices, companies are unlikely to comprehensively disclose climate risks and opportunities in SEC filings in the absence of clear guidance from the SEC.

Frugality an ongoing financial strategy with Americans

In Uncategorized on May 26, 2009 at 4:37 pm

Amid reports that retail spending is picking up and the economy may be stabilizing, American families say they are looking beyond the eventual recovery to a more frugal future that embraces pinching pennies and saving money as a desirable and permanent financial strategy.

The First Command Financial Behaviors Index indicates that the majority of April respondents are embracing a more fiscally conservative philosophy in their personal finances. Three quarters of respondents believe the United States was “too wasteful” before the recession. They now say that “when I save and invest my money instead of spending it, I feel like I’m doing the right thing” and “a disciplined saving mentality brings me peace of mind.” More than half (58 percent) agree that “the current economic situation will have a long-term effect on my spending behavior.” And perhaps most promising, half say they have embraced frugality as a way of life.

“Americans are showing encouraging signs of a fundamental, long-term shift in their approach to personal finances,” said Scott Spiker, CEO of First Command Financial Services, Inc. “After years of living in a consumption-fueled economy, consumers are rediscovering the time-tested values of prudence and self-reliance. This change signals a slower but healthier recovery. And that should be celebrated. What we don’t need are encouragements from government or Wall Street to spend, spend, spend. Rather, the time has come for Americans to embrace a new frugality.”

This new attitude is emerging at a time when the American outlook on personal finance is improving. More than one-third (38 percent) of April respondents indicate that their personal financial situation is stable, a 17-point increase from October 2008. Almost half (46 percent) of respondents say they are still “cutting back even though I do not need to.” Only 34 percent say they are looking forward to “the economy rebounding so my spending habits can go back to normal” and just 10 percent feel that living paycheck to paycheck “is a perfectly acceptable way to live.”

Americans continue to cut back by reducing leisure activities (53 percent), attempting to reduce utility bills (49 percent), reducing clothing purchases (48 percent), shopping at discount stores (48 percent), increasing their use of coupons (46 percent), reducing holiday spending (45 percent), reducing travel (43 percent) and bringing their lunch to work (40 percent). Among those who are cutting back, 26 percent said that it is out of necessity and two-thirds (66 percent) said that it is “preparatory.”

Signs of a new frugality can be gleaned from the way Americans are handling their federal tax refunds. Out of those respondents who have received a refund, 45 percent say they will put the money into savings and investments and 40 percent say they are using their refund dollars to pay off debt. First Command’s ongoing research reveals that a disciplined approach to savings and paying down debt tends to increase feelings of optimism and financial security.

“As the ratio of savings to debt increases, so do feelings of financial security,” Spiker said. “The savings-to-debt ratio is perhaps the most significant contributor to feelings of financial optimism, for as one’s savings-to-debt ratio increases—meaning more savings, less debt—feelings of financial security increase, and feelings of being financially stretched decrease. The numbers make it clear that having a reasonable savings-to-debt ratio makes a person feel better about the present and more optimistic about the future.”

Relatively few consumers who have received a tax refund say they will spend it on such non-essential items as consumer purchases (16 percent), vacations (9 percent) and dining out (3 percent). Look for more of this type of frugal spending behavior in the months ahead. Less than one quarter (23 percent) say they “will stop cutting back once the economy is back on track.” The percentage of Americans who have cut back for good is on the rise, from 14 percent in February to 16 percent in March and to 18 percent in April. An additional 16 percent of Americans in April said that they will continue to cut back for 2 to 10 years.

“These results suggest that those who think spending levels will return to past highs anytime soon are living in a dream world,” Spiker said. “The average American has regained fiscal sanity, and that’s a good thing. We’re not likely to see a genuinely healthy economy unless Americans are spending and saving wisely.”

Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. www.firstcommand.com/research

Gold Rush

In Uncategorized on May 20, 2009 at 4:44 pm

 

 

 

 

Demand for physical gold as a hedge against losses in paper assets, such as stocks and the US dollar, is breaking records.

 

 

Record-Breaking Bank Failures Driving More Investors to Gold

Seven more U.S. banks were seized by regulators on July 2, 2009, pushing this year’s total bank failures to 52 as a result of rising losses on home mortgages, commercial real estate loans, and defaults on consumer credit cards. Even more startling is that bank closures barely make the news these days.

Serious investors, however, are keeping a close watch on the instability of the banking system, according to Capital Gold Group, Inc., a premier provider of precious metals assets in the U.S.

Capital Gold Group reports that investors holding cash in low-yielding bank accounts are turning to the safety and protection of physical gold that they can hold in their own hands and which they control, rather than allowing their money to sit in a bank earning next to nothing or rolling over a low-yielding CD for an additional term.

Gold has traditionally been a safe store of wealth for anyone looking to preserve and protect their long-term savings and retirement, and today more than ever, commercial banks dislike gold because it represents competition for investment dollars and savings, and because they can’t make money without your money on deposit.

Most recently seized were Founders Bank of Worth, IL; Millennium State Bank of Texas, Dallas, TX; First National Bank of Danville, Danville, IL; Elizabeth State Bank, Elizabeth, IL; Rock River Bank, Oregon, IL; First State Bank of Winchester, Winchester, IL; and John Warner Bank, Clinton, IL.

The Federal Deposit Insurance Corp. said its roster of problem financial institutions grew to include 305 banks and thrifts in the first three months of this year. On March 4 of this year, Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures. “A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said.

As of June 30, regulators had seized the most U.S. banks this year since 1933, a total of 45, with six months left to go.

“Banks are making good efforts to deal with the challenges they’re facing, but today’s report says that we’re not out of the woods yet,” FDIC Chairwoman Sheila Bair said in a statement. “As I see it, we’re now in the cleanup phase for the banking industry.”

“Troubled loans continue to accumulate, and the costs associated with impaired assets are weighing heavily on the industry’s performance,” Bair said in a statement.

The names of banks on the watch list are kept secret to prevent runs that could destabilize them further. But at the pace at which failures are happening, it won’t be long before we learn the names of those financial institutions in trouble.

In the meantime, record numbers of investors aren’t waiting around. They are moving their retirement assets out of the banks, the stock market and money markets and into physical gold IRAs, a traditional hedge against volatile markets and returns that can’t keep up with inflation.

Consumers Going For Gold

Total demand for all types of gold – bullion, proof, and numismatic – have doubled year over year and continues to escalate as people realize the full impact of our economic condition. Gold is being viewed as a store of wealth, an essential part of every investment portfolio, and vital for the preservation and protection of one’s assets in very uncertain economic times.

People are reporting huge losses in the market, in their IRAs and 401ks, and are unhappy with low-yielding bank accounts. They realize these types of accounts will never reach their intended goal.

People are also catching on that shares in gold mining companies, gold ETFs, and shares of a gold mutual fund don’t provide the safety and security of the tangible asset because they’re still investing in paper gold. They never actually get to take physical possession of the metal. The safety and security of gold is in taking possession of it. You keep it in your hands, you put it somewhere safe, and you allow it protect the buying power of your money for the long-term.

As for those concerned about whether it is too late to enter the market: Buy gold now, then wait.  

Considering gold’s inverse relationship with the dollar, a shrinking US dollar bodes well for gold. The US Dollar Index has lost over 30% since 2001, and continues to decline, while gold has risen over 300%.

Investors have a much better chance of recovering losses in the market by holding gold instead of stocks.

Louise Yamada, one of the top technical analysts in the business, stated in a recent CNBC interview (March 2, 2009) that the destruction of wealth relative to the crash of 1929, when the market declined 49%, was really in the 3-4 years following 1930, after a secondary rally in the market, which she related to the rally of 2007 within an ongoing bear market.

“In 1930, when the crash support level of 1929 gave way, that was the decline was wiped out the wealth, and that’s what we’re worried about today,” she said.

With the recent rush to buy gold, as well as cash-strapped consumers selling their gold to pay for everyday necessities, complaints against gold dealers have risen. Buyer beware! The biggest offenders, according to a recent tally on the Better Business Bureau’s website, are companies advertising heavily to buy unwanted gold jewelry on cable television channels. One company had 314 complaints in the previous 36 months. Another had 97. The complaints range from pricing discrepancies and misleading advertising to customer service issues and claims for lost shipments.

“Not every internet gold buyer is dishonest,” says Michael Gusky, whose company, GoldFellow.com has no complaints against it. The company was created to provide consumers a safe, competitive and easy method to sell unwanted gold, sterling silver and platinum.
“The owners of GoldFellow are the most honest and ethical dealers I have had the pleasure to do business with,” says Carla Stern who first tried to sell her unwanted jewelry to two other internet gold buyers. “GoldFellow paid me $1800 for the same package I had sent to a highly advertised on TV and Internet dealer, who tried to pay me only $310,” explains Stern.

Gusky strongly recommends reading a company’s Website and comparing policies and pricing before choosing a gold buyer. “Ask how much you will be paid for one pennyweight of 14 karat gold jewelry and compare prices. Ask if you will be notified of your value before you’re paid,” he suggests. “And for goodness sake, never agree to drop your valuables in a regular mailbox. There’s no record or proof that it has been mailed – and it’s not insured although many of our competitors would like you to believe otherwise.”

As for the production side of things, market research firm IBISWorld states that  global mine production of gold decreased by 3.3% to 2,400 tons in 2008. Higher production in China was more than offset by declines in other major producing countries, especially Indonesia.

“China extended its lead as the largest producer over the year, accounting for 12.7% of world production”, said IBISWorld analyst Toon van Beeck. Other major producers of gold include South Africa (10.7%), the US (9.9%), Australia (9.7), Peru (7.5%), and Russia (7.1%). Countries outside of the top eight producers account for 34.2% of production.

In rare public announcement not too long ago, China revealed its gold holdings, which are 1,054 tons — up from 600 tons in 2002. Signs that China is losing confidence in the US dollar as a reserve currency further attest that gold is becoming the world’s de facto currency.