Tough Times Ahead for 100-Yen Stores

May 9, 2013, 3:13 p.m. ET

Tough Times Ahead for 100-Yen Stores

By MAYUMI NEGISHI

TOKYO—Japanese investors and exporters may be cheering the dollar’s return to the ¥100 mark, but for the thousands of “100 Yen” discount stores around the country, it signals tough times ahead.

The 100-yen shops have become representative of a deflationary Japan, thriving by astonishing customers with the purchasing power of the ¥100 coin. They offer everything from cellphone chargers to fake eyelashes for the same low price. Their business model has centered on a strong yen pushing down prices of the imported goods that fill their shelves.

But now the Bank of Japan has declared a new war on deflation, and a primary side effect of its primary weapon—a massive monetary easing—has been a vastly cheaper yen. That is starting to erode already razor-thin profit margins for the discounters.

“A five yen difference is huge,” said Yasuaki Ikeda, manager of two US.Mart 100-yen stores in Tokyo. He imports 90% of his products, 80% of them from China. “When the cost of 100 chopsticks moves from ¥80 to ¥85, I have to ask suppliers to pack fewer chopsticks,” he said. Read more of this post

Berkshire Sells Debt to Buyers Buffett Pities; “Berkshire issuing debt is effectively an efficient way to short the bond market.”

Berkshire Sells Debt to Buyers Buffett Pities: Corporate Finance

Berkshire Hathaway Inc.’s $1 billion note sale shows that while Chief Executive Officer Warren Buffett may pity investors who’ve stuck with bonds as yields fall to record lows, he’ll sell them as much debt as they want.

The company’s Berkshire Hathaway Finance Corp. sold five-and 30-year securities offering the company’s lowest coupons for those maturities ever. Berkshire, whose holdings span insurance, railroads, newspapers and manufacturing, has reduced its bond investments to $28.6 billion from $34.1 billion in the last three years, regulatory filings show.

Berkshire isn’t buying corporate bonds, Buffett, 82, said during a May 4 interview with Bloomberg Television’s Betty Liu after the company’s annual meeting in Omaha, Nebraska. With the average yield on U.S. corporate debt having fallen to a record low 3.35 percent this month from more than 11 percent in 2008, the second-richest American said at the meeting he has empathy for savers who depend on bond interest.

“Buffett’s views on current interest rates are pretty clear,” said Richard Cook, co-founder of Cook & Bynum Capital Management LLC in Birmingham, Alabama, which oversees about $270 million including Berkshire shares. “Berkshire issuing debt is effectively an efficient way to short the bond market.” Read more of this post

Insight: New York authorities in wave of pension payment deferrals

Insight: New York authorities in wave of pension payment deferrals

9:28am EDT

By Edward Krudy

NEW YORK (Reuters) – For Niagara Falls, a city in New York staring at the prospect of insolvency in the face of a weak local economy and soaring employee costs, diverting money earmarked for pensions to cover short-term spending needs seemed like the only option. “We don’t like doing it, so this is sort of a last ditch strategy for us,” Mayor Paul Dyster told Reuters in an interview. Postponing pension payments was the way to avoid cutting back on town services, he said. Dyster is not alone. A poster child for the struggling upstate economy, Niagara Falls is now one of around 200 New York municipalities, counties and other public employers that delayed more than $1 billion in pension contributions last year as they struggled to plug budget shortfalls. The delay in contributions mirrors steps taken some years ago in other states like New Jersey and Illinois, both now grappling with massive pension funding troubles. The problem is national. Nearly half of all public plans did not make their required contributions last year and had self-declared unfunded liabilities of around $834 billion, according to Wilshire Consulting. Read more of this post

Keep on, or enough already? Fed officials spar over QE3

Keep on, or enough already? Fed officials spar over QE3

Thu, May 9 2013

By Ann Saphir, Luciana Lopez and Jonathan Spicer

SAN FRANCISCO/NEW YORK (Reuters) – Little over a week after U.S. Federal Reserve policymakers overwhelmingly endorsed a plan to keep buying bonds to spur economic growth and hiring, they are airing their differences over their super-easy policy.

“I think we should try as hard as we can” to turn things around, Chicago Federal Reserve Bank President Charles Evans said in an interview on Bloomberg TV, in a forceful defense of the bond-buying program, known as QE3 because it is the Fed’s third round of quantitative easing since the Great Recession. Read more of this post

“Bond God” Gundlach says yield-seekers at risk if interest rates rise; “If interest rates rise up to 5 percent on the 10-year Treasury, you are going to get killed in a lot of these types of vehicles”

Gundlach says yield-seekers at risk if interest rates rise: CNBC

Filed 12 hours ago

NEW YORK – Jeffrey Gundlach, star bond investor and the head of DoubleLine Capital LP, said on Thursday that investors who are fleeing bonds in favor of alternatives offering higher yields could suffer losses if interest rates rise.

“If interest rates rise up to 5 percent on the 10-year Treasury, you are going to get killed in a lot of these types of vehicles,” Gundlach, the chief executive and chief investment officer of DoubleLine Capital, told cable television network CNBC. Using master limited partnerships as an example, he said such investments have a lot of leverage and interest-rate risk.

Los Angeles-based DoubleLine Capital has $59 billion in mostly fixed-income assets. Read more of this post

Paying for the great urbanization of China

Paying for the great urbanization of China

BY HAL HARVEY | 8 MAY 2013

Article Highlights

• China is in a historic transformation, adding hundreds of millions of people to its urban centers, but its new cities have been built in ways that waste energy and create congestion.
• It is in the interest of other countries that Chinese urban development decisions be well made, because they will affect resource markets and climate change worldwide.
• To support the design, transportation and other reforms needed to create livable and healthy cities, China must change its method of financing urban infrastructure.

Consider the impact Pierre L’Enfant had when he laid out Washington, DC, or when Robert Moses worked his plans for New York, or when Daniel Burnham designed Chicago. These planners set patterns that have affected us ever since: They significantly determined how we get around, how our work and home lives connect, whether we live in welcoming neighborhoods, how much traffic congestion we suffer, and more. Their influence reaches into the industrial metabolism as well, as design choices affect our energy and material consumption. And the patterns persist for many decades. Read more of this post

Is There Political Peril in Letting China’s Cities Grow? China’s Vision for a ‘New’ Urbanization

May 9, 2013, 10:05 PM

Is There Political Peril in Letting China’s Cities Grow?

Chinese leaders since Mao Zedong have been wary of letting China’s largest cities reach megacity proportion. The usual reason cited is the fear of turning Beijing, Shanghai and other such cities into Latin American-style slums. But Ohio State University political scientist Jeremy Wallace says there may be another reason: regime survival. In a study of authoritarian regimes between 1946 and 2004 (pdf), he finds that “regimes with capital cities that dominate the urban landscape fail nearly four years sooner and face 60% greater death rates.” Read more of this post

Girl power: As the supply of female factory-workers dwindles, blue-collar women gain clout

Girl power: As the supply of female factory-workers dwindles, blue-collar women gain clout

May 11th 2013 | SHENZHEN |From the print edition

SITTING around a restaurant table, six workers discuss the progress of their labour action. Five of them are women, as are most of their several hundred colleagues who have been occupying the toy factory since mid-April. They have been sleeping on floors, braving rats and mosquitoes, to stop the owner shutting down the factory without giving them fair compensation. Those at the table are all migrants from the countryside. A couple are tearful. All are angry and determined not to give way. In Guangdong province, where nearly 30% of China’s exports are made, women usually far outnumber men on labour-intensive production lines such as those at the toy factory in the city of Shenzhen, next to Hong Kong. Rural women are hired for their supposed docility, nimble fingers and attention to mind-numbing detail. But in recent years Guangdong’s workforce has changed. The supply of cheap unskilled labour, once seemingly limitless, has started to dry up. Factory bosses are now all but begging their female workers to remain. At the same time the women who have migrated to the factory towns have become better-educated and more aware of their rights. In labour-intensive factories, stereotypes of female passivity are beginning to break down.

Read more of this post