Professional Documents
Culture Documents
VOLUME VI
ISSUE I
03
05
06
07
08
09
11
BY COLE OBANA
BY AILLEN YOU
BY ELIZABETH HOLMDAHL
BY JOE NOVAK
BY MICHAEL MINTSKOVSKY
BY JAKE GANS
Stampede of Mega-Mergers:
EBITDA.
AT&Ts generous valuation
helps justify its whopping 35% premium paid for Time Warner, which
comes to $107.5 a share. This premium stands out even more when you
consider the fact that close competitors like 21st Century Fox and Apple
are remaining on the sideline, despite
the fact that both of them have previously approached Time Warner about
potential strategic relationships.
AT&Ts willingness to pay such
a high premium also reflects that it
does not want to lose grip on the opportunity to acquire some of the best
content available. Especially during a
time when AT&T is having a shrinking video customer base in U-Verse
Broadbrand, even considering gains
from Direct TV, due to cheaper alternatives like Netflix and SlingTV. As
of the end of this years Q2, AT&T
gained 342,000 customers, but lost
391,000. Not to mention, AT&T is
facing rising competition from unlimited data offerings from rivals like TMobile and Sprint. Time Warner
most likely knew the dissatisfied financial position that AT&T is in, demanded a high price, and AT&T
gladly accepted it.
number] it is worrisome that consumer spending the backbone of economic growth [in the second quarter],
slowed markedly, he relates. Overall,
PCE contributed 1.47% to the 2.9% of
growth in real GDP.
Investment
Private inventory investment rebounded and contributed 0.61% to
growth in real GDP (after a decline in
the second quarter) due largely to an
upturn in durable goods manufacturing
and in wholesale trade. Strong inventory
investment reflects not only strong business and operations but also optimism
for sales in the coming months.
Nonresidential fixed investment
also increased, contributing 0.15% to
growth in real GDP. Increases in investment in plant and property (largest in
two years), also reflect business optimism.
Government Spending
Increases in federal government
spending reflected upturns in national
defense spending, which was slightly
offset by downturns in nondefense
spending. Meanwhile, smaller decreases
in state and local government spending
(as compared with previous quarters)
reflected decelerated decreases in
spending on structures. Overall, government consumption expenditures and
investment contributed 0.09% to growth
in real GDP.
Net Exports
An increase in exports, as driven
by exports of food and beverages
(notably soybean-related products), contributed substantially to real GDP. The
momentum, however, may not be here
to stay. As Ian Shepherdson of Pantheon Macroeconomics relates, the soybean export surge will reverse in [the
fourth quarter], deflating the currently
inflated exports number. A lower net
exports number will likely lead to some
headwind in the fourth quarter. All in
all, net exports contributed 0.83% the
most since 2013 to the growth in real
GDP in the third quarter.
Conclusion and Outlook
Third quarter GDP eased most
worries about an economic slowdown.
While some economists believe its too
early to celebrate, other financial experts, such as Chris Rupkey of MUFG
Union Bank, believe that the low unemployment rate of 4.9% will keep consumption and economic growth strong.
As we can already see, retail sales
(excluding strong car sales) rose 0.8%
in October, marking the best two-month
retail sales in the last two years. As related by sector leaders, Kohls and Macys, improving sales provides optimism for strong sales in the upcoming
season as well as economic growth in
the last months of the year.
With a strong third quarter GDP
and general optimism in the remaining
quarter, a rate hike in December is a
definite possibility.
RAISING RATES:
Elizabeth Holmdahl
credibly low given where the U.S. economy is and where it is going. Janet
Yellen has also become increasingly
concerned of overheating in the US
economy. With November serving as a
placeholder, most heads are turned towards the December Fed meeting to
finally see the hike.
Another reason to raise interest
rates is the so-called liquidity trap.
Many point to Japan as a case where
interest rates became so low that it rendered the Bank of Japan useless. This is
because policy changes to increase the
money supply no longer effectively promoted private spending. Although interest rates went negative in the Eurozone,
many believe that if interest rates reach
0% domestically, it could spell disaster
for the United States. Should the US
economy turn towards a recession without the ability to lower interest rates,
there may be nothing that the Fed can do
to smooth out a rapid economic decline.
However, it is important to note
that the Fed never actually touches individual interest rates. The Fed targets
desired values for macroeconomic variables, because the complexity of the
economy allows the Fed a degree of
influence, but not complete control. In a
statement released by the Fed, the board
explained that in determining whether
it will be appropriate to raise the target
range at its next meeting, the Committee
will assess progressboth realized and
expectedtoward its objectives of maximum employment and 2 percent inflation. Indeed, the Fed reaches this
target through many means. One primary action is to alter the Federal Funds
Rate, the rate that banks charge each
other for overnight loans. The Fed targets this rate through Open Market Operations (OMO), or more commonly, the
buying and selling of US government
financial hub.
The Shenzhen-Hong Kong connect
also strengthens Chinas bid for inclusion into one of MSCIs key emerging
markets indices. Listing in MSCI, a
globally-followed index provider to
which roughly USD 1.5 trillion is
benchmarked, would bolster confidence
in Chinas equity market. It would serve
as another milestone in Chinas economic reform and as a symbol of credibility as the second largest world economy. This past June, China was denied
inclusion for the third year in a row on
the basis of a lack of market accessibility, a common complaint among
MSCIs institutional client base. Although index inclusion provides an incentive for new reform, China is seemingly committed to liberalization regardless of what MSCI decides when
they reevaluate Chinas mainland equities.
The new Shenzhen-Hong Kong
market is not without its challenges for
investors. Tech valuations are already
sky-high in Shenzhen, with P/E ratios
trading at twice the level reached during the apex of the U.S. tech bubble,
which presents the daunting task of
striking gold in an expensive market.
Trading on the new exchange is expected to commence on December 5th;
stocks are at an 11-month high in China,
but many investors believe the Hong
Kong-Shenzhen news is already priced
in and therefore are cautious on the upside. It will likely take another four
months for the exchange to fully launch,
and significantly longer to observe the
full effects on the Chinese and global
markets. Though the jury is still out on
the announcement, the stock exchange
program certainly represents a momentous step in the right direction toward
full Chinese participation in the global
economy.
tenure in the pharmaceutical industry as CEO of Turing Pharmaceuticals, he was directly responsible
for a 5600% increase in Daraprim,
an AIDS treatment drug. After
gaining executive control of Turing, Shkreli promptly raised the
price of Daraprim from $13.50 to
$750 per pill. This brought about
incredible negative attention to the
pharmaceutical industry. Since the
conviction, his pompous twitter
rants have only amplified the public profile of Turing Pharmaceuticals in the wake of the Daraprim
price gouge, deepening the distrust
and negative sentiment towards
biotechnology and pharmaceutical
firms as a whole.
Mylan has been all over the
news recently regarding a pricehike with their EpiPen product.
CEO Heather Bresch was grilled in
front of Congress this past September for increasing the price of an
EpiPen pack to $600. Senator
Warren was insistent on sending a
message to large pharmaceutical
companies to stop the unnecessary
the entire process. Corporate inversion describes a company relocating its headquarters on paper to a
lower-tax nation while retaining its
material operations in the United
States, a high-tax nation. Corporate
tax inversion in the healthcare
space is being brought to light.
Corporate tax rates in America are
among the highest in the world
(3rd highest in fact) at 35%. Pfizer
is not the only company to do this
either. As companies follow Pfizers precedent, they are enjoying
US patent protection, while avoiding US corporate taxes. There is a
growing lack of confidence in the
industry to provide returns to the
American system.
The constant price hikes on
life-saving drugs, avoidance of US
corporate tax policies, and corruption has the potential to stunt future earnings and innovation in this
sector. Moreover, relevant macroeconomic events should serve to
further impact the future of the
Pharmaceutical industry. Only
time will tell if the pharmaceutical
industry gets back to saving lives.
Pattrick Dunne
Mohammed Lawal
Jameson Mah
Colby Shofield
William Sauser
Graphic Designers
Andrew Cui
Emily Zhao
Vice President
Erin-Marie Deytiquez
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