Medill Money Mavens » Globalization

India is ripe for investment – right now

kiransood — Thu, 28 May 2009 15:44:23 +0000

Earlier this week, India unveiled its recent election results which were overwhelmingly in favor of Prime Minister Manmohan Singh. Singh (center) has worked to allow the country’s leading entrepreneurs to build businesses with little interference from government, with the end goal of creating a free market. (http://newkerala.com)

BY KIRAN SOOD – MEDILL NEWS SERVICE

As the U.S. economy slowly recovers from a recession and gradually puts the pieces of its economy back together, across the Atlantic, India’s economy is poised to take off after the recent re-election of economist Manmohan Singh as Prime Minister.

Much is at stake for the future of the nation’s economy. India’s newly re-elected Prime Minister faces the tasks of ending government corruption, elevating the economy, and helping the poor. However, economists have reason to believe that now is the ideal time to invest in India, as its Sensex soared 17 percent in one day after last week’s election.

“We shall have to prioritize for the economy to be brought back on the rails,” said former Foreign Minister Pranab Mukherjee, who is thought to be the favored candidate for finance minister.

Investors are optimistic that the desire for change is greater than ever now. When Singh was finance minister, his policies allowed direct foreign investment while eliminating other constraints. Since he started applying his ideals in the early 1990s, India’s GDP has increased 400 percent and millions of middle-class jobs have been created.

Analysts see little question that political stability will positively impact India’s sovereign rating, which is currently at a BBB – long-term credit rating, the lowest investment grade level.

Investors also agree that the young workforce presents a demographic advantage over nations like China and Japan. About 30 percent of the nation’s 1.2 billion people are younger than 15. If these young people are put to work in good jobs by the new government, this would provide invaluable human capital for the nation.

The combination of these factors is leading some economists to think twice before issuing declarations that China is further ahead in the race to be Asia’s next superpower.

Multinational companies increase global innovation spending

kiransood — Mon, 27 Apr 2009 22:47:05 +0000

Companies that deploy 60 percent or more of their R&D outside their home countries tend to outperform their less-global peers, according to a new report by Booz and Co. (bizresearch.com)

BY KIRAN SOOD – MEDILL NEWS SERVICE

In today’s ever increasing global world, on any given day you can call a computer company for tech support and speak to a technician in India, call an airline company to make reservations and speak to an assistant in Denmark, or even have newspaper copy edited by someone overseas.

In the newest technological trend, multinational companies are sending a significant share of their research and development money outside the countries in which they are headquartered, according to a new study.

In this year’s annual Booz and Co. report, Beyond Borders: The Global Innovation 1000, authors Barry Jaruzelski and Kevin Dehoff found that in 2007, the top 80 U.S. corporate spenders doled out $80.1 billion of their $146 billion in R&D funds overseas.

While it may seem as though this deployment of funds overseas means a loss of jobs, intelligence, and influence, the study shows that companies headquartered outside the United States spent $42.6 billion on R&D conducted in the U.S.

“Key finding: 91 percent of the world’s 1,000 largest R&D spenders conduct innovation activities outside the countries in which they are headquartered.”

The most crucial aspect to these findings is that companies that aggressively globalized their R&D spending demonstrated a stronger financial standing. For these major companies, there seems to be a payoff from this increased deployment of spending and skills on a global scale.

Why should it matter that multinational companies are spending on R&D outside their headquarters? The delicacy of global markets demonstrates how fragile the system can be. When the economy of one nation tanks, nations who rely on it for spending, development, and innovation, feel the ripple effects.

Take the auto industry, the third-largest spender on R&D in the Booz study. Say, for example, that in order to meet increased U.S. fuel efficiency standards, the industry is relying on battery-life technology being developed in Japan.

If Japanese markets are struggling, this will likely delay development of technology in the country, which will push back availability for U.S. automakers to implement this technology. A delay in the new implementation of fuel efficient technology could adversely impact supply for American consumers who want green vehicles. This could impair an already ailing industry.

The increased globalization of R&D spending reveals the delicate balance of global inter-dependence. There is fierce competition for the best ideas, and when we are driving an alternative fuel vehicle of the future, it matters less where the technology was developed, but that our increasingly global economy is strong enough to support it.

Headlines for week of May 26

Administrator — Sat, 31 May 2008 04:35:54 +0000

Don’t play with your food: Are hedge funds to blame for rising food prices?
By Frank Carlson
May 29, 2008

How would you like to earn a million dollars today, just to have it disappear tomorrow? Worse, how would you like it if this happened every day?
That’s exactly what grain elevators are experiencing as record commodity prices and dramatic price swings force them to adjust the amount of margin money they ante up every day for grain forward contracts used to hedge, or lock in, today’s price.

MBA, law students struggle to land scarce sports business jobs
By Justin Amoah
May 29, 2008

Like Devin Hester on a punt return, sports business jobs are hard to catch.
Every year, top fleet students graduate from Northwestern University’s law and business schools, and its master’s in sports administration program. Many enter high-paying positions in corporate America. But for students pursuing careers in the sports industry, jobs aren’t nearly as ubiquitous.

Kankakee resident takes American farming expertise home to Nigeria
by Lola Dada
May 29, 2008

Olu Adubifa, living quietly in Kankakee with his wife and three children, decided to start his own farm in Nigeria, the country where he was born. The idea of agriculture didn’t appeal to him immediately.

Headlines for week of May 12

Administrator — Sat, 17 May 2008 16:51:14 +0000

As inflation motors on, can your portfolio keep pace?
by Patrick Temple-West
May 13, 200

Chicago-area investors are looking to shift their portfolios into higher gear—with greater risk—to keep pace with rising inflation.

The Standard & Poor’s 500 and Dow Jones Industrial Average are in the red for 2008—down 4.6 percent and 3.0 percent respectively. Home prices have declined an average of 8.3 percent in the first quarter of 2008.

Labor, corporate leaders disagree at globalization forum
by Patrick Temple-West
May 13, 200

Amid the crowded debate over the causes of the housing crisis and rising inflation, the discussion of America’s competitiveness—or the demand for U.S. labor—has been lost in the clamor. But participants of a town hall meeting on globalization sponsored by the Financial Services Forum tried to revive the issue.

Two Illinois congressmen, Democrat Rahm Emanuel and Republican Peter Roskam, met with 11 corporate and labor leaders at the Illinois Institute of Technology Monday to offer ideas for education and trade policies

Emptying wallets to fill their bellies, athletes pay the price for food
by Molly Seltzer
May 14, 200

Commercials for sports drinks, apparel and supplements celebrate the price athletes pay to achieve superior fitness levels. But as meat and dairy costs escalate, what’s the price athletes pay… for food

Party planners see more green in eco-friendly celebrations
by Leena Krishnaswamy
May 14, 200

Going green is becoming increasingly popular in Chicago and local residents are finding new ways to balance style and sustainability. One way they’re doing so is through eco-friendly entertaining. Leena Krishnaswamy talked to area business owners who make their living planning and catering green parties

Bernanke critiques financial firms, calls for them to raise capital
by Patrick Temple-West
May 15, 200

Financial firms “are hunkering down” and raising fresh capital to replace losses from the credit crisis, Federal Reserve Chairman Ben Bernanke said in a speech in Chicago Thursday.

Firms have partially replaced their losses, but are still “very protective of their liquidity” and conservative when making new loans, Bernanke added, which he said underscores the need for firms to repair their balance sheets by selling both assets and stock to raise revenues so that the firms can begin lending again.

With increased regulation looming, Fed chief talks of risk management
by John Detrixhe
May 15, 2008

Though calm seems to have returned to credit markets roiled by nine months of financial turbulence, the expectation remains for the increasingly activist Federal Reserve to increase its patrols of the financial system.

Fed Chairman Ben Bernanke spoke Thursday in Chicago about the origins of the credit turmoil, which he traced to a series of institutional risk management failures. Bernanke was the keynote speaker at the 44th Annual Conference on Bank Structure and Competition at the Hotel Intercontinental.

The deep roots of rising food prices

Frank Carlson — Thu, 08 May 2008 20:44:43 +0000

BY FRANK N. CARLSON – MEDILL NEWS SERVICE

Global food prices have been skyrocketing in recent months, with global food commodities 60 percent higher than just two years ago. But can increased demand, driven by developing nations, explain such a meteoric increase? If China has been humming along at double digit growth for a decade, why are food and energy prices only now catching up with us?

In a report released this month, Ronald Trostle of the Economic Research Service, part of the USDA, explains the many factors that have led to these rapid price increases. Perhaps a disappointment to some, the causes are not as simple and straightforward as we may want them to be, and there is not one culprit (“demon ethanol,” speculation, OPEC, etc.) that deserves the sole responsibility or blame for the current situation.

Rather, the factors that led us to this point are many and complex, and likewise the remedies will be long in coming and involve difficult adjustments. Famed investor Jim Rodgers said in a recent interview with Barron’s that the commodities bubble may last until 2018. But understanding the roots of this bubble is the first step in bringing much needed relief to the people of developing nations, and Trostle has brought to light several causes worth exploring:

Robbing the kitchen pantry–The relative stability of prices in the 80s and 90s led governments to decrease their buffer stocks because more liberalized trade meant they could depend on the global market for food. So, as they drew down their grain stocks, they increased their dependency on other countries for their immediate food needs while limiting their ability to absorb price shocks and shortfalls abroad. In fact, the global stocks-to-use ratio has fallen from 30 percent in 1999 to less than 15 percent today, the lowest level since 1970

A day of reckoning–Now more vulnerable to shocks in the global food market, harvest shortfalls occurred in a number of regions around the world in 2006 and 2007 because of adverse weather conditions. These shortfalls cumulatively led to back-to-back drops in global average yields of grain and oilseeds, something that has happened only three other times since 1971. Without the benefit of a backup supply of grain stocks, this led many countries to promote protective policies like eliminating export subsidies and increasing export taxes, restricting or banning exports, and this seized up markets and induced a buying panic.

If you don’t eat your meat–Changes in dietary preferences of rapidly developing nations mean more people are eating meat, which requires more grain. For example, to raise one lb. of beef, you need 7 lbs. of grain; For one lb. of pork, you need 6. 5 lbs. of grain. So as people in developing nations are lifted out of poverty, undeniably a good thing, their preference for more meat increases demand for grain and puts more pressure on already strained supplies.

Fields of fuel–Increased ethanol production, mostly a result of a Federal mandate that required a noxious fuel additive to be replaced with ethanol, led vast amounts of corn and soy to be diverted from food production to fuel. While one cause among many, this stress on food prices has been singled out by many as the culprit in rising prices and legislators may move to alter the 2007 energy bill in order to relieve this added pressure.

They’re in the money–Because of large foreign exchange reserves held by net importers of food like the oil-exporting nations and countries with large trade surpluses like China, high-priced commodities continue to be bought at the expense of developing nations without those large currency reserves. This means that nations most unable to deal with rising food prices are the ones hit hardest by them.

The high rollers’ suite–Many are now starting to question the role of hedge funds, index funds and sovereign wealth funds in speculating in and possibly exacerbating high commodity prices. In 2006 more of these investing arms became involved in commodities, often with long-term buying positions. Under pressure from farming groups, the Commodities Futures Trading Commission is considering closing a loophole that currently allows hedge funds to speculate with more money than previously allowed.

Headlines for Week of April 28

Administrator — Sat, 03 May 2008 16:48:17 +0000

Chicagoans hungry for books about food, publishers happy to serve up more
by Molly Seltzer
Apr 28, 2008

Loaves and popovers grow lofty and puffy because yeast feeds on sugar and releases carbon dioxide. These rising breads are causing something else to rise — the popularity of food books.

In the past decade, interest in food books has skyrocketed for Chicago’s publishers, libraries and bookstores.

Memorabilia market for steroid-tainted ballplayers dries up
by Justin AK Amoah
Apr 30, 2008

Many sports memorabilia dealers say they had a bad feeling three years ago when former Chicago Cubs slugger Sammy Sosa appeared before Congress and denied using illegal performance-enhancing drugs.

“When everything with the steroid scandal started to unload, his prices started to drop like a rock,” said Marc Schoder, sports collectibles investor, who wasted no time selling his stock of about 100 Sosa collectibles but still lost several hundred dollars.

Popping corn prices means little for price of Corn Pops
by Frank N.Carlson
May 01, 2008

Record high corn prices may be tempting some farmers across the Midwest to ramp up corn production, but Peotone farmer Jim Robbins is more cautious.

Last year, Robbins split the corn and soybean crops on his 3,000 acre farm evenly between the two crops, and this year he’s doing the same. As a 28-year veteran farmer, Robbins says that by the time he changes his crop rotation to take advantage of the high prices, those prices might be long gone.

Area landscapers, greenhouses hitting pay dirt in housing downturn
by Maisie Ramsay
May 01, 2008

At the Gethsemane Garden Center in Chicago’s Edgewater neighborhood, sales are booming. The business has expanded its offering of outdoor furniture to 2,400 square feet and employee Collette Hogan reports sales of trees and shrubs have shot up.

Chicago-based landscaping company Christy Webber & Co. is booked up until June despite losing 6 percent of its airport landscaping contract with the city of Chicago

Fed rate cuts stimulate growth at home, inflation abroad
by Patrick Temple-West
May 01, 2008

The people seeking discounted eggs who stormed a supermarket in Chengdu, China, last August may not have known the name Ben Bernanke. It’s probable that the demonstrators in the United Arab Emirates or the 12 people who died fighting over food in Yemen did not know what role the U.S. Federal Reserve Board Chairman has in driving their domestic inflation.

A high-tech village flourishes within Skokie
by Manuel Baigorri
May 01, 2008

When Forest City Enterprises Inc., a publicly traded real estate company based in Cleveland, acquired the research and development labs of Pfizer Inc., formerly G.D. Searle & Co., in March 2005, it embarked on one of the most ambitious projects currently underway in the biosciences industry in the Midwest. The idea was to create a high tech park inside the village of Skokie and to bring companies to those facilities.