What a week in Wall Street! Mixed news in the financials, unemployment and housing.
J.P Morgan reported profits that were up 36% for the second quarter mostly as a result of their stable and more conservative business model, but their results continue to show difficulty in the lending operations. Goldman posted their best quarter but by increasing risk since most of the revenue increase came from its investment banking and trading operations. Citi, Bank of America and GE showed how they continue to struggle as their business models continue to adapt to new the economic reality in the financial sector.
Surprisingly, housing starts were up 3.6% in June, and unemployment claims dropped 47,000 to 522,000 last week although unemployment remains at 9.4%. In addition, the Federal Reserve continues to increase the money supply by increasing its holdings in treasury and mortgage backed securities.
What do these numbers mean for the US economy and the business environment?
Well, we need a stable financial sector before we can have sustainable economic growth. Good news in the financial sector should be positive for the business environment. However, the financial sector continues to struggle with lending and profits and revenue did not come from the right places! We need to see consumer and business lending increase before we can see sustainable economic growth. US small and mid-size businesses rely of short term and long term lending to support their short term operations. Without credit availability, new projects are delayed and layoffs become necessary; which in turn, increases unemployment.
Because the government remains the only sector where spending seems to be growing, business will be more likely to survive by doing business with the government! We will transition from a B2B economy to a Business to Government economy over the next few years. Lack of credit availability will prevent the consumer from supporting US economic growth. It will be up to the government to pick up the consumer spending lost due to difficulties in the credit markets.
So, what does it all mean for businesses and consumers? Businesses should turn their production of goods and services to match the needs and wants of government spending while consumers should retrain themselves to match the skills that will be needed in the new economy. Sectors providing goods and services to infrastructure development, green or alternative technology and business services should prosper.
Tell me what your thoughts are regarding these numbers and the business environment. Feel free to elaborate and agree or disagree with my views and the views of other bloggers!
Tags: Bank of America, Citi, Goldman earnings, JP Morgan
I agree, that businesses should turn their production of goods and services to match the needs and wants of government spending while consumers should retrain themselves to match the skills that will be needed in the new econonmy. Declining businesses should make some conservative changes like JP Morgan. Laying off marketing depts. in companies is not always the best way to go about things. Unemployment remains at 9.4% which is not such a bad thing, in my eyes.
I find it very interesting to know that the green sector will grow. My father runs a business that sells a product created in Minnesota that heats all of your home and hot water through the use of a wood burning stove (ie renewable resource). It is nice to know that his business will continue to grow.
I think housing is up because of the lower rates and the people with great credit being able to purchase them. The banks still are not loaning to people with good credit or mediocre credit, even if these people are well founded in their jobs, which continues to be a problem.
GE should be able to turn around before those of us who don’t do government supplying. They have the contracts but will work to get more and continue to grow.
Unemployment stinks for those of us who do not have jobs and cannot afford to live off of it but the lack of jobs and the lack of willingness to go out and find a job is also a difficulty these days.
YES!! GO GREEN!! i am a big fan of the going green movement. I’m not saying i am a hippie or what not, but i believe going green is a good idea. My brother and his friend started a business called Green Vans. If any of you went to Warped Tour you may have seen them there. What they do is they convert large vans to run on veggie oil, and then they rent them out to bands that travel across the country. I don’t believe the banks should start lending out again yet. I feel this economy is still to unstable for money to be tossed around. I disagree and agree with Crystal1818 at the same time. I do agree that there are a lack of jobs, but i disagree with the lack of willingness. I have 10 to 15 people come into my job and apply to work there on a daily basis, but companies are afraid to hire people in fear that there weekly rate goes above what they want. it is difficult now a days to find a job because no one is hiring because they “can’t afford it” but i feel it is in a way greedy for big well of corporations to say this.
My first time talking about economy…haha…enjoy my answer .Through out the reading I found one sentence that pretty much said it all. “We need to see consumer and business lending increase before we can see sustainable economic growth.” and this happens by having a STABLE financial sector. And behind this idea it branches down to solving other issues with sound banking systems, strong capital markets and a firm foundation for the financial service. The financial sector has a great learning program which has helped to build dialogue in different countries, between the public and the private sector but obviously the program does not have the answers to promoting growth, improving regulations and other issues. Now this may be random, but I also thought about the banking system, maybe there is weak management, maybe it has poor microeconomic developments. This answer can keep breaking down into more answers but my main idea is that there should be a steady or stable financial sector. By having positive results it will help many people and people who have buisness that can work with the governement or the other way around.
The quality of life and work makes life to develop or to come to a crisis where we are now. My opinion how to escape of this crisis is a better control of Bs. When in a family there is a crisis—there should be one who will take control and solve the problem. The structure of a country is a family too, somebody needs to have absolute control of education, business… I am not for dictators but for order in the country. For example, we can see the structure in another country-Russia. (I don’t have anything in common with this country now, it’s just interesting) Russia had a crisis of 10 years and came into a conclusion that there is a need of control. Magnates in businesses were stealing and selling resources for their own benefit and invested in foreigner banks. The money didn’t come back to their own country—which brought even more desperation amongst people, unemployment. Now, a different thinking would bring money back to the economy: the profits from the local resources to introduce in local businesses, which will bring new jobs, possibilities, and quality of life. As an example (in Russia) a few years ago, Hodorkovsky—a leader-businessman was sued, because, being a billionaire, he didn’t return the money to the economy of the country where he took the natural resources, and didn’t bring up people’s/worker’s conditions, but used the profit just for his own benefits. As a result, the president (V.Putin, at that time) had power to bring this case to the Supreme Curt, and to return everything to the people and economy. After that, with all the money a lot of small businesses got financial support, people got jobs, and the quality of life got better. Following years showed development in the economy, education, and the quality in life in general.
Now, every country has its own economy. B2B economy it’s an extreme and B2Government is another extreme. Why do not change it to B2B2Government economy (as a triangle)? B2B is to remain free to make their deals, but Government as one of tree corners of this triangle—to check quality of these Bs and in the time to make a balance and to help those who are in need. As in my example with triangle: the Government will observe tendency in economy and in the time can change direction to avoid cresses.
In regards to the new economy, I think that new “Green” focused business’ will prosper because there are always people out there who think that being green is crucial to run a business and there are consumers out there who would choose to go to a green business over a regular business. I dont think that the businesses should have to change their ways to satisfy the governemts needs, its a good idea in theory for now while we are in this recession because the government is the one that has all the money but when will it end? If we changed it to a B2G, then the smaller businesses will always be under the control of the governemnt and it will be very hard to them to expand and do their own thing.
One of the major disappointments I have with the financial institutions is their lack of whatc can only be called interest in the common good. As the article pointed out the main way for the economy to reach a stable and healthy platform is for mid- and small-level businesses to succeed and thrive. However, as was also pointed out, in order for this to happen these businesses must rely on credit. The reason for this is that businesses need credit to pay bills and buy inventory, while consumers need credit in order to have the disposbale funds on which to buy the goods or services these businesses are selling. Unfortunately as the major financial institutions are quickly cutting off access to these lines of credit the ability of many businesses to continue on in a profitable way has evaporated. As all of us know the sole reason for a business or company to be in existance is to create a profit and when its ability to do that disappears often the business itself does as well. Another point I’d like to add is that the profits being reported by many of these institutions has come at the cost of predatory business practices. For example several of the banks have used their bailout money to buy stakes in new banks, instead of using these funds to extend credit to consumers as they were supposed to. Suffice it to say when a large bank buys a bunch of new banks their profits will almost certainly go up. Now I myself do not hate the rich, however what good does a country full of poor citizens and a very small percentage of extremely wealthy ones do for anyone besides those at the very top of the food chain. In my opinion, nothing! The bailout money that most of these banks received was to be used specifically to make loans to those in desperate need of them, including those same mid- and small level businesses that whithout those loans would be reduced to non-existence. Unfortunately in the end American greed won out again, as the heads of these banks sought to merely to use those funds to show greater profits and grant themselves larger bonuses. In light of these actions it is now obvious that even after almost 4/5s of a trillion dollars given out by the government, it is not even close to enough to stop many businesses and consumers from falling completely down to the bottom of the economic heap. Yes the unemployment rate has gone down slightly but does anyone really think that it’s going to be enough to keep the government from becoming the primary force behind economic spending for the forseeable future? Of course not, and that is the problem. When the money drys up for the average consumer, those at the top of the chain need to start finding other ways to keep their own incomes intact, and since they have much more direct contact with the governemnt than the average person it is much easier for them to structure things in such a way that funds from the government continue to be funneled to the top instead of filtered down to those that actually need it and can help turn the economy around
For the overall US economy, I think that the measures of the economic performance by the retail sector will continue to suffer as the economy is suffering. Now that people are short with money, they will not be shopping as much as they used to at the stores they would normally spend their money in. On the other hand, if they do choose to shop and spend their money loosely, then they may be looking to shop at cheaper stores.
Working in retail as part of the Abercrombie & Fitch company for three years now, I have seen firsthand the lack of shoppers in comparison to years before. Within the A&F company, there are other brands that branched out including abercrombie (kids) Hollister, Gilly Hicks and Ruehl. Hollister makes 60% of the companies’ profits. Ruehl makes less than 3% of these profits. As a result of this, the 29 Ruehl stores are all being closed in January. Outside of the company the result of the earlier mall hours may be a direct result of the worsening economy. The reason for the amount of sales Hollister brings in could very well be a result of the younger sector of kids shopping at Hollister because the store’s target market is kids between the ages of 12-18. These kids in this age bracket do not have to money conscious as much as others who are much older than they are with additional money worries and their money needing to go elsewhere. The 29 Ruehl stores facing closure in January will definitely leave a lot of people jobless. Those managers who are commonly fresh out of college will be left without a job and may not have anywhere to turn for a while. Those younger part time employees depending on these few hours a week will be left without jobs and will be harder and harder to find any other jobs that may have been easy to find will not have the chance to find them in the struggling economy. As mentioned in the article, companies such as these depend on the back to school season. This season is almost as busy, if not more busy than the Christmas season. Many items that are full price and in season are rarely bought and a bulk of the sales come from the clearance. All in all, I think that the lack of the retail sales will continue decline as the economy is still in the recession. Until then, retail may suffer and will not make as much profit and not bring in as much money and business as times before.
Its hard to believe that our economy is coming down to almost all business wanting to work with the government rather than consumers. i personally believe that what the government did to help the bug businesses wasn’t right. i think that bailing out your consumers would have helped the economy recover faster, to a certain extent that is. i’m not saying everyone should have gotten bailed out, but bail the people who have average credit scores. i know it then doesn’t seem fair to not bail out the people out with really low credit scores but most of the time that was there fault. if the government bailed out the consumer rather than the big business the consumer would have been able to continue buying things and it would eventually bail out most of the struggling bug business, theoretically that is. that would have been my perfect scenario.
Going green is definitely something every kid in college should be looking into, because that industry is one of the fast growing industries out there. almost all the car companies are producing some form of hybrid car model if not really fuel efficient cars. Even larger scale companies are beginning to look into other ways to cut down on energy usage, i know i have seen a few IBM commercials talking about there energy efficient servers. even our very on school is going green. they are int he process of building a 0 building(a building that will require no outside power, it will be self sufficient), I know when i get out of school ill definitely be looking to land a position in a green company because as of now it seems like the sky is the limit for that industry.
Even though a Business to Government economy seems to be a solution for a faultering company to survive, I am wondering what the long-term effects will be. The Government doesn’t always seem to be making the wisest decisions when it comes to the economy and this just seems like a short-term fix. I do agree however, that companies involved in anything to do with frastructure development will see a substantial growth in the near future. Green businesses especially seem to be gaining the consumers confidence and I’m sure they will be able to expand in more areas than we can even comprehend.
I made a mistake! My previous post was meant to be on “Digesting credit, retail, and Boston sports news!”
By having the businesses turning their production of the goods and services to match the needs and wants of government spending will be beneficial to these businesses I think. With the consumers retraining themselves to match the skills that will be needed in the new economy will also be very beneficial to both the individual and the company that they are working for. With the consumers who are skillful for the jobs in their company, the company will run more smoothly as a result of the experience of those working. I also agree as to the businesses who are turning to the alternative technology and the companies going green will prosper. I think that they will do very well because the green movement is picking up and is becoming more and more popular. With more people becoming involved in this green movement, more people will have more knowledge in finding ways to save money using the alternative energy sources. These alternative energy sources and the green movement will start saving money instead of wasting so much of it on the energy sources that are being used nowadays.
I strongly disagree with Crystal1818 with the lack of willingness just because i have friends that gratuated from college about a summer or two ago and they still cannot find a job.I believe that the days are so evil. Therefore, people that hire dont even care if you have a a degree,master or associates these days. What they are really looking for are any one with expierences.And yes! even though jobs are so difficult to find I still believe that people should not get discourage and continue looking for a particular job hoping and knowing with a positive attitude that you will find that job.
I agree with what trosario has to say about companies not really looking for a paper saying how smart or qualified you are, but physically how experienced that certain individual is. Also, not to give up if your fresh out of college and no jobs are hiring because if you truly love and have a nack for whatever it is you went to school for you will find that perfect job. All in all I am a huge fan of going green because at the end of the day that company will know that they did their part in making sure we get to exhale another day. Going green just shows that that company cares about others not just themselves. I go green almost everyday myself!!
Bank’s do not want to loan money out because they are waiting to see if they can pay government off the money they borrowed with so many restrictions. The numbers show that the economy is slowly showing signs of improvement. Only time will tell if this is improvement or a increase due to stimulus money.
The financial markets need to have government spending in order to prevent a total collapse of the economy. I believe the bad part of this situation is until we got back to a free market economy, true economic growth will always depend on the government. The US depends on a free market in order to have a strong sustainable economy.
JP reported profits that were up to 36% for the second time as a revenue of more conservative business model but still show difficulty in lending operations and this is due to the fact banks find it hard to give loans to the businesses or even consumers due to credit issues.
According to bsalb1784 and i totally agree with him businesses will get better, if they can still get their credit from the banks in order to still stock up their companies likewise the consumers,who also need to get the same credit to go go those businesses to buy their essential goods.secondly i really do not agree on a b2g government due to the fact that it will also be difficult for the business to expand because the govt may want to control them.What we should realize is the better the economy the better the lives of the people in it everyone has a role in making the economy so much better from the govt-the people and the better the economy the better the people.