Apple Takes US Market Back

                I’m sure you’ve seen them everywhere—on the bus, on train, people going to work, kids, your professor, etc. Yes, you guessed it, the iPhone. Living in NYC, one of the most iPhone dense cities in the world, you really cannot miss this device. The noticeable white earbuds, people taking quick photos and the variety of protective covers are ubiquitous in this small city, and even more prominent amongst NYU students. Even more so with the most recent launch of the iPhone 5, to the extent that Apple’s smartphones now, once again, lead the entire US market.

                If you go to NYU and you see all of these people with iPhones, it might be hard to believe that Android phones had actually controlled the highest percentage of the market for a period of time, up until the release of the iPhone 5. According to Kantar, Apple will continue to amass even more of the market with the holiday season coming up. In Western Europe, demand for iPhones remains high but authorized dealers are saying there simply is not enough supply. On the other hand, while Apple does increasingly well in the States, it only has 1% share in Brazil compared to Android’s 56.7% and 67.5% in China, two of the fastest growing countries in the world.

                It’s clear that Apple and Android are competing neck-and-neck for the global mobile phone market and are doing very well respectively, but others aren’t so fortunate, such as BlackBerry for example. Its US market share has fallen to just 1.6% last month which led to an 8% decrease in share price, despite optimistic gains for its upcoming BlackBerry 10 phone. While iPhones and Androids continue to dominate the market, Research in Motion might be very close to its end. 

-Jonathan Louie

The Cyber Monday Deal No One Was Looking For

On Cyber Monday, Amazon.com shoppers found deals on laptops, cameras, phones, ... and even Amazon's debt! Today, along with many online deals on consumer goods, Amazon also sold bonds to raise over $3 Billion for what what the company calls "general corporate purposes". Taking advantage of low interest rates, Amazon tapped into the bond market to build its cash reserves for the first time since May 1998, when the company was junk-rated.

The bonds were met with mixed reactions. S&P rated the bonds double-A-minus, a relatively strong rating just 2 notches below the US government's rating. The company is expected to generate strong revenues with its products such as the Kindle over the next few years. Moody's however, rated the debt at Baa1, 2 notches lower than S&P's rating.

Amidst the chaos of the start of the holiday shopping season, it seems most people were concerned with the hottest deals on electronics. According to a few investors, however, these bonds were the best deal around. It is unlikely Amazon is in dire need of the extra cash, but with interest rates being held down so low, it was just too good of an opportunity to pass up.


-Smit Purohit

The End of an Era: Bal Thackeray

Bal Thackeray, the controversial Hindu leader, died this past Saturday, November 17, at the age of 86. He had been sick in the weeks leading up to his death and ultimately passed from cardiac arrest. Thackeray is known throughout India for his Hindu nationalist beliefs and for inciting violent riots on their behalf. Many supporters refer to him as Hindu Hriday Samrat (emperor of Hindu hearts), while critics refer to him and his followers as thugs.

Thackeray, who was originally a cartoonist, became involved in politics during the

Samyukta Maharashtra Movement (United Maharashtra Movement) in the 1950s. It championed the creation of an Indian state named Maharashtra that would unite all Marathi speaking people and bolster their identity. The capital of the state would be the city of Bombay, India’s financial capital. This goal was achieved in 1960. Thackeray then founded the political part, Shiv Sena (Shiva’s Army), in 1966, and has led it since then. The Shiv Sena and Thackeray are responsible for the city of Bombay changing its name to Mumbai, after the Hindu goddess Mumbadevi, the city's patron deity. Since then, the party has pressed for entities such as the Bombay Stock Exchange, the Bombay High Court and Bollywood to change their names as well.

The party governed Maharashtra from 1995 to 2000, but has been unable to regain power since then. Thackeray himself has never held a political position, but is widely regarded as one of the most important political figures for Hindus. The party has been losing power in recent years, but still has countless threatening advocates.

He spent his life trying to curb the proliferation of Islam and trying to prevent migrant workers from coming to Maharashtra. He encouraged violence as a way of manifesting these goals. Thackeray is largely blamed for a series of riots in 1992 after a group of Hindus razed the Babri Masjid in North India. Thackeray is recognized as a motivating orator and political instigator. He was arrested twice for politically inciting speeches. In 2008 he wrote, “Islamic terrorism is growing and Hindu terrorism is the only way to counter it. We need suicide bomb squads to protect India and Hindus." The most recent move by the party was attacking shops and people promoting Valentine’s Day.

Upon hearing of Thackeray’s sickness, his estate received visits from Bollywood’s finest, including Amitabh Bachchan and Salman Khan. India’s Prime Minister Manmohan Singh offered condolences to Thackeray’s son, Uddhav Thackeray, who is thought to assume power of the party. Thackeray’s followers began to gather outside his residence upon hearing the news, leading the police to increase their presence for fear of riots outside. Followers were seen weeping in the streets.

His legacy will be one of condoning violence to promote his religious agenda and xenophobia. The way in which Uddhav Thackeray navigates the upcoming weeks will dictate the future of the party.

Written by: Lynn Bernabei

The Expiration of Hostess: Who's at Fault?

It is very likely that many of you have already run to your nearest supermarkets and bought the remaining few boxes of Twinkies. After all, the iconic company, with whom our childhoods are associated with, has come to an unfortunate demise. Hostess filed for liquidation today, after a hard-fought battle with the baker’s union over contract negotiations, ending all business operations immediately.

It is only natural after today’s events to determine who the real culprit at fault is. Some blame it on poor financial decisions made by management to raise their own salaries multiple times despite declining customer demand. This explanation is justified given a lack of improvement to Hostess’ financial statements after three previous sales and two prior bankruptcies. But that answer seems almost too simple and straightforward for such complicated failed negotiations.

Hostess had warned its bakers that a strike would force the company into filing for liquidation. The union nonetheless decided to go on strike, given their satisfaction with contractual terms. This decision was either made because the union did not want to set a precedent for other companies or believed Hostess was entirely bluffing. Regardless, Hostess has now eliminated the 5,000 union jobs as a result of the financial distress, in addition to 13,000 other jobs for employees who are not part of the baker’s union. Typically, unions are heralded as valuable components of society since they attempt to serve the greater good for people with little opportunity for expression. In this case, however, can the same be said about the baker’s union? How does one balance the discontent of 5,000 employees unwilling to concede against the cost of additional jobs of people who have no relation to the dispute? Hostess may no longer be an operating company, but what will become of the 18,000 individuals who will now join the unemployment line?

- Yannan Qiu

The Global Player Exchange

With the global football transfer market worth an estimated $3 billion, financial holding companies are increasingly interested in buying up the transfer rights of the world's biggest stars. And the returns can be enormous.

The transfer market is a complicated system but can be simplified to this: most football teams have "youth systems" that train young talent of all ages. Barcelona's La Masia Academy, from which Lionel Messi, Xavi, and Andres Iniesta were developed, can be considered the pinnacle of these youth systems. If players are good enough, they can make the first team as teenagers. In some cases, opposing teams do youth transfers to continue developing a young player but to also bring them to the club for cheaper than a full fledged star. From then on, each time the young player changes clubs, his original club that developed him will get a "development fee" and the rest of the money involved in the transfer will be given to the team transferring the player out.

In most instances, the team owns all of a player's transfer rights. If he leaves, they get all of the money involved in the transaction. However, with the top heavy nature of modern day football, the bottom table clubs are suffering financially, resulting in these clubs selling portions of their player rights to holding companies as a method of financing their operations. If, for example, Radamel Falcao (pictured above) were to leave Atletico Madrid, Natland Financieringsmaatschappij BV would net 5% of the estimated 50 million euros he's worth.

Now as a fan of the sport, I think it's great that the value of players is going up, a testament to the popularity of the sport and the status of footballers as marketable stars. However, the concept of buying player stock worries me. The upper tier of clubs, in the league of Barcelona, Real Madrid, Manchester City, etc. have enough financial power to hold on to their players without selling their rights away. This allows them to inflate the price of their players, making it virtually impossible for opposing teams to pull a star from their ranks; the reported $1 billion buyout clause in Cristiano Ronaldo's original contract at Real speaks volumes for this case. The lower tiers would have no choice but to sell out to financial holding companies and lose out on huge transfer market gains should the player develop into a bona-fide star.

And what about a player that negotiates his own player rights? If they have yet to reach it big, but a company offers a great deal for even 50% of their transfer rights, said player can lose out on millions of euros over the course of his career. This can put youth players in poorer markets at even more of a disadvantage. With the market for third party transfer rights valued at $500 million, that is half a billion dollars that can be pumped back into the system, back to the ailing bottom tier teams. The Premier League is ahead of the game and bans third party ownership of player rights, it's about time for La Liga and the Bundesliga, among the other top tier leagues, to follow suit. Empowering the players and the teams that develop them will ultimately be the first step in bringing back a competitive landscape to association football.


-Aureen Sarker (Photo Credit: Atletico Madrid S.A.D)

The Gray Depression

     In the next few years, the average age of the US population is going to start drastically increasing. By 2025, the population of people over 65 will almost double in the United States, while the population of working-age adults and children will only rise by about 15%. Clearly, since the older-aged population is growing faster than the middle-aged and youngsters, the American population’s average age will rise. The reason that the growth rate of the older population is so high is because the first of the people born in the baby boomer era have just begun retiring and will continue to do so until 2029. The baby boomers were people born after World War II, in the years 1946 to 1964 (marked in red on the graph below). These years were marked by high post-war birth rates, and now, 65 years later, they are aging and perhaps also taking a toll on the US economy, which is just now getting back on track.

     The graying of the US population has serious implications on the economy. As a person ages, naturally, their body starts to deteriorate and they require more care. Now, with all these people aging at once, the combined increase in payments to Social Security and Medicare can be pretty significant for the economy as a whole. One of the most common diseases associated with old-age is Alzheimer’s disease. Currently, there are 5.4 million Americans who suffer from this disease, with payments for their care estimated at around $200 billion. By the end of 2025, there could be more than 15 million people with the disease. The aging population will strain the national healthcare system, and it could be argued that combined with Obama’s Affordable Health Care Act, our healthcare system can get severely crippled.

            

     Historically, the biggest spenders in our economy are middle-aged adults from ages 45 to 54. This is because they are working in the prime of their career, usually making peak earnings, and they have a lot of expenditures at that point in their life. When you’re younger, you might not by a house or car that is high-end, but when you’re nearing retirement and you’re making the most money you’ve ever made, you’ll be feeling wealthier, which increases consumption, and thus most spending in a person’s lifetime happens in this age range. At this stage in a person’s life, they may have to finance their children through college, pay off their biggest mortgage, and make payments on their best car. Currently, we have more people in this age range than ever before because all the baby boomers have aged. Extending this, in about 10 years, after baby boomers have grayed even more past that age range, we are going to have a shockingly low amount of people from ages 45 to 54. This could severely depress our economy because the majority of spending comes from people ages 45 to 54, so when the proportion of those people decreases and the proportion of people ages 65+ increases at the same time, the economy is losing out on its biggest source of consumer spending, while having to financially support another group of people, through Social Security and Medicare. The aging of this big part of our economy could have negative implications in the near future, which is bad news for a recovering economy.

-Yashwant Chunduru

Kingfisher’s Wings Grounded

On October 6, the Director General of Civil Aviation (DGCA) in India asked Kingfisher Airlines Ltd. to stop selling tickets. The airline hasn’t paid its employees since March, leading its pilots, technicians and engineers to go on strike as of October 1st. The strike compromised the safety of the airline’s flights since the engineers are responsible for certifying the aircrafts before flight, warranting the DGCA to suspend the airline’s license.

Kingfisher and its employees were able to reach a compromise on October 25 regarding wage payment. Kingfisher agreed to pay four month’s wages by the end of the year, and the remaining three month’s wages by March 2013. The airline also announced that it would be fully operational within a month’s time, and its employees could resume work then. Sanjay Aggarwal, the airline’s CEO has said, “We expect to be in the sky soon and put forth our case to the Directorate General of Civil Aviation. We have addressed all the concerns of the employees. We are all together in this.”

Aggarwal may be a bit too optimistic. Since its launch in 2003, Kingfisher Airlines has never made a profit and currently finds itself strapped with a $2.5 billion debt according to the consultancy Centre for Asia Pacific Aviation. The airline had 66 planes operational at this time last year, and now only has 10. The airline’s owner, the liquor tycoon Vijay Mallya blames the government for his company’s woes, "Very high fuel costs, obscenely high taxation, lack of foreign investment permission, until literally six weeks ago - so many different factors which make the Indian aviation space actually somewhat unattractive other than the potential growth going forward," he explained. "The government needs to look at taxation very seriously. You can't have a 25 percent average sales tax on fuel when crude oil prices that used to hover around $60 or $70 a barrel are now well in excess of $100 a barrel."

Kingfisher has planned to meet with the 17 banks that have exposure in the airline in the coming days. The consortium is looking at a 1.1 billion dollar writeoff on Kingfisher’s loans—the biggest in Indian corporate history. State Bank of India, the leader of the consortium, has over 278 million dollars of exposure in the airline.

Kingfisher will have to regain its license from the DGCA in order to start flying again. It should proceed cautiously.  A delay in paying its workers’ wages could lead to another strike, and another license suspension. The DGCA will be less willing to reinstate the airline’s license a second time. Kingfisher should also tread carefully with its investors. With a plummeting stock, and no eager lenders on the horizon, the airline will have to be willing to work with the 17-bank consortium to get its wings confidently in flight.

Written by: Lynn Bernabei