Real Estate, The Economy, and News: Imports/Exports

Showing posts with label Imports/Exports. Show all posts

Friday, February 17, 2017

California's Wine Exports Reach Record-Breaking Levels

Of the various foods that California produces for export, many have faced hard times over the past couple of years, mainly due to the scarcity of water throughout the state. Almonds, California's largest export, grow on trees that require gallons of water to grow properly. Those almond trees have suffered over the past couple of years, and, even though rainfall has increased, the trees may not recover, at least not any time soon. Fortunately, even though the almond market has hit rough times, other exports from California have reached record levels. In his L.A. Times article, Geoffrey Moan discusses increased exports of American wines in 2016, led by California's brands.

Even with the increased strength of the dollar, a limited water supply, and high tariffs, which all had limiting effects on the wine exports, foreign trade revenue still increased from $1.49 to $1.62 billion in 2016. Of all of the wine exported from the United States, around 90% came from California. Not only did the volume of wine increase, so too did the prices of those wines. Golden State labels have gained higher prestige in foreign markets, and vintners take advantage of that "premiumization" to mark up the wines. It seems to be a good business strategy that hasn't negatively impacted demand while still increasing revenue.

The single country that imported the largest amount of U.S. wine was Canada, accounting for $431 million in table wines. Behind them came Germany and Britain who, along with the rest of the countries in the European Union, imported a total of $685 million in American wines. Behind them came Mexico, Switzerland, and several Asian countries, who collectively accounted for the remaining portions of U.S. wine export revenue. Wine exporters have faced some difficulties with laws in British Columbia and other areas that prevent retailers from carrying foreign wine brands, but exports have still increased despite such restrictions.

Exporters throughout the U.S. expect that the demand will continue increasing, so limits on foreign retailers could pose future issues. While some exporters are working with foreign governments to try to gain equal access to their markets, other exporters make "trade tours" through the countries that import the most product, to renew their relationships and remind importers of their company's commitment to the wine market. While American wines have plenty of domestic demand, which is why the wine industry depends much less on exports than other industries, vintners are focusing on foreign markets mainly because they represent the best opportunity for fast growth. Their work right now will help to define their growth in the industry in years to come.

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Friday, May 20, 2016

Berkshire Hathaway's Investment Boosts Apple Stocks

Warren Buffett, one of the richest men in the world, has been known to avoid investments in technology. So, it came as a huge surprise to many when it was revealed that his company, Berkshire Hathaway Inc., purchased 9.81 million shares of Apple stock in the first quarter. In his L.A. Times article, James Peltz described the reasoning behind Buffett's investment and how it affected Apple's shares and the stock market as a whole.

It is true that Buffett and his company generally avoid technology investments, mainly because Buffett admittedly doesn't understand technology enough to take the risk. However, they have made one exception in the past: Buffett's company owns a stake in IBM valued at $12.3 billion. Berkshire Hathaway's main investments are in companies like American Express, Coca-Cola, and Wells Fargo. Additionally, Berkshire owns dozens of companies such as See's Candies and Geico Insurance.

Likely because of Buffett's record of success in business and his company's large investment portfolio, Apple's stock prices rose 3.7% after the purchase was revealed on Monday. As of March 31, the end of the first quarter Berkshire Hathaway's stake in Apple was valued at $1.07 billion but is likely worth significantly less now due to declining Apple stocks. According to analysts, Berkshire likely made the purchase due to Apple's low prices in recent months. Apple's top-selling item and source of the majority of their revenue is their iPhone. The iPhone and other Apple devices had lower-than-expected sales this year, which was the main reason for lowered stock values.

Buffett has been quoted saying that the Apple purchase was made by one of his stock-picking lieutenants who did not consult Buffett before making the decision. However, Buffett seems optimistic that the stocks will regain their value and more in future months. Berkshire is always purchasing companies and shares and very rarely makes bad investments, which explains why so many normal people are suddenly investing in Apple, following Berkshire Hathaway's lead. Buffett, however, is known for his shrewd, long-term investments, and will likely drop the tech company, which he would usually avoid, when the investment gets back to its original value. Buffett doesn't understand tech companies, but some of his top advisors do. He may end up changing his stance in the future, though, if it turns out that the investment in Apple pays off as well as is expected.

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Monday, December 28, 2015

Online Shopping's Increased Popularity Causes Extended Shipping Delays

Just in December alone, it is expected that United Parcel Service will deliver a total of about 420 million packages in the United States while its competitor Federal Express will deliver about 228 million. The U.S. Parcel Service is also in the game, expected to ship about 545 million packages this month. All together, they will be shipping a huge amount, almost 8% more than they did at this time last year. According to Samantha Masunaga, in her L.A. Times article, this dramatic increase in the number of people and retailers needing to ship packages is due mainly to a recent increase in e-commerce.

This year, many retailers offered Black Friday deals on their websites, essentially giving their customers a choice. They could come into the store on Black Friday and shop, finding deals and purchasing items to take home with them immediately. Or, they could shop online, earning the same deals and reduced prices as in the store, and have the item shipped. Sensibly, many customers chose the second route, choosing to wait a little bit longer for their item rather than braving the hectic battle in the store on Black Friday. While this online integration by the retailers helped to keep Black Friday running more smoothly in stores, it came as an unexpected hit among shipping companies, whose predictions were far surpassed, which led to many delays on deliveries.

With the holidays approaching, shipping companies were getting even more overwhelmed with many more orders than in previous years. Because of that, they began telling customers that there would be no assurances that their package would arrive before Christmas unless they used the higher-cost options, like two-day or overnight shipping. Even those options were not perfect. UPS's on-time delivery rates for two-day and overnight delivery have varied throughout the month, ranging around 97%. Basically, when it comes down to it, even the more expensive options are not a guarantee, so consumers should plan ahead and order far in advance if they want to make sure their item arrives in a timely fashion.

Cyber Monday sales exceeded expectations, reaching $3.07 billion, which was 16% more than last year's sales. During Black Friday, about 103 million people got their deals online while 102 million preferred to do their shopping in brick-and-mortar establishments. Online purchases this year, especially during its final months, soared higher than ever expected, which is why shipping delays occurred. While shipping services were prepared for higher demand than in previous years, they could hardly know exactly how much the demand would increase, so the explosion of e-commerce's popularity caught them off-guard. Even for many online merchants, this year's demand was surprising. For several retailers, popular items ran out very quickly, and some even experienced crashes on their websites due to the increased traffic.

Most people in this day and age have a smartphone or some other way to get online while on the go. Because of this, online shopping may be easier and more appealing than having to go to stores and hope that they have the item you want in the correct size or color or style. It is simpler to just go to a website, type in exactly what it is you want, and order it. Over the holiday season, about 25% of e-commerce shopping was done via a mobile device. Our society's increasing dependence on new technology could be a reason why retailers have integrated more of that same technology into the shopping experience, making it easier and faster for potential customers to shop with them.

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Friday, November 20, 2015

Some Stores Find Black Thursday Not As Profitable in the Long Run

Where several stores have decided to push up their Black Friday sales earlier on Thanksgiving day, many others are doing the opposite, closing their stores for the entire holiday in a show of support for those shoppers and employees who wish to spend time with their families. In her L.A. Times article, Samantha Masunaga investigates some of the deeper reasons behind the closure, as well as the financial implications for the businesses.

Over the past couple of years, Black Friday sales have been starting earlier and earlier. Historically, Black Friday is the day after Thanksgiving and is a time when people can get good deals on new electronics like video game systems, televisions, and handheld devices. Until relatively recently, Black Friday started around midnight on Thursday night (technically Friday morning) and continued throughout the day. As companies began to realize that Black Friday sales brought in a lot of income, they started opening as early as 8 or 9 PM on Thanksgiving itself, enabling the sales to last longer and bring more customers into their stores.

This year, though, some companies are pushing it even earlier, some as early as 5 or 6 PM on Thanksgiving, which cuts family time pretty short for employees. In opposition to this, many slightly smaller companies are choosing to remain closed all of Thursday, with a belief that the few extra hours will not make much of a difference in the long run. Companies like Staples, Gamestop, and H&M have announced that its stores, headquarters, and distribution centers will be closed for the holiday. This decision, while upsetting to some potential shoppers, could potentially lead to greater loyalty among other customers who see that the companies care about enabling their employees to spend time with their families on the holiday.

Furthermore, many of the smaller retailers have come to a realization that opening their stores earlier for Black Friday doesn't have so much potential for profit. Analysts have shown that larger retailers, who can more afford to purchase big-ticket items in bulk for very reduced prices, are helped by a longer Black Friday, but that the smaller stores don't stand a chance trying to compete. So, this year the smaller retailers are concentrating on building goodwill and encouraging customers to shop online, then are opening up on Friday with their Black Friday sales. Statistics even show that those stores that opened early on Thanksgiving had a reduce in sales of about 11% over the rest of the weekend since those people who shopped on Thanksgiving were less likely to come back later.

Large companies may find out eventually that starting Black Friday on Thanksgiving does not positively affect them to the required extent to make a sizable profit. After all, when employees work on Black Friday, especially the portion of Black Friday that falls on Thanksgiving day, they get paid a higher hourly rate. At some point, the stores will reach a point at which sales are maximized while costs are minimized, at which point they will try to open their stores at that sweet spot every year. Because they continue to open ever earlier, it appears that they have not yet found that perfect time. Maybe they will eventually go back to being closed during the entire holiday, whether due to a lesser profit ratio or a surge in public opinion. It's hard to tell, so we will just have to wait and see.

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Friday, August 21, 2015

Devaluation of the Yuan Affects California's Economy

To shopping centers throughout the Southland, busloads of Chinese tourists are a necessary and regularly expected source of income. Especially in summer months, some places like the Beverly Center get an average of 70 such buses per month, full of tourists ready to spend. Shan Li, Samantha Masunaga, and Andrew Khouri wrote recently in their L.A. Times article about how recent devaluation of the Chinese yuan could have positive and negative effects on various California businesses.

Where 2.2 million Chinese tourists to the U.S. spent nearly $24 billion in 2014, 12.6% more than in 2013, many expect that such spending will likely slow down in the coming months. Up until recently, tourists found that their money would stretch much further on brand-name products in California than in China, but as the yuan loses value, that is beginning to change. Furthermore, even as a decrease in tourism hurts stores and shopping centers, it also affects sales on a larger scale. For certain luxury brands, like Coach, a decrease in sales to tourists leads to a decrease in earning, which causes stock prices to fall.

The current economic trifecta in China (slowing of the economy, devaluation of the currency, and a crackdown on political corruption) has led tourists to become more careful with their spending, according to Li, Masunaga, and Khouri. However, they point out that while the yuan loss in value hurts local retailers, it can actually be quite helpful for importers. For U.S. businesses that import Chinese products, the devaluation of the yuan means that the dollar stretches much further than it did before. Since importers will take advantage of this situation and increase purchasing, experts predict that California's ports will get plenty of use in the coming months. This will help to provide jobs for dockworkers, truck drivers, and warehouse workers.

Unfortunately for exporters, such positive outcomes are not likely. They are expected to suffer far more than local businesses due to the fact that import taxes in China can range as high as 20 to 30%.
Some tourists who come to the U.S. regularly anyway to visit family or send their children to summer camp may continue shopping in the U.S. for such luxury goods, but it wouldn't make economic sense for Chinese companies to continue importing American goods when the value of the yuan is so far outweighed by the value of the dollar. Costs would be much higher, especially on top of the exorbitant import taxes, and so it would be unlikely that American exporters would find business improving while the yuan's devaluation continues.

As Louis Glickman once said, "The best investment on Earth is earth." Analysts expect that as the yuan's value continues to plunge, Chinese investors will slow down the purchase of American products and focus on American real estate. Since the dollar remains relatively steady, many such investors will prefer to "park" their money in a building, rather than hold onto the quickly-devaluing cash. The increasing prevalence of property investment could help to dull the effects of the reduction in retail. However, economists warn that China's economy is connected to our own. If China's economy starts to fail, then that won't be good news for the U.S.

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Tuesday, May 19, 2015

California Employment Rates Rising, Mainly Due to Temporary Jobs

4/24/15 - While California's Inland Empire suffered many of the harsh consequences that came with the housing market crash, its economy has been coming back over the past few years. The Inland Empire currently contains one of the fastest-growing job markets in the state, aided mainly by growth in the logistics sector, which involves transportation and storage of goods. While jobs have indeed been added, and unemployment rates thereby lowered, Chris Kirkham's L.A. Times article points out that this growth may not actually be the significant shift it appears to be.

As the ports have gained more use in previous years, Riverside and San Bernardino counties have joined the supply chain of international trade. Strategic locations in these counties have become “inland ports” for goods traveling throughout California and to the rest of the country. The Inland Empire, on the other hand, has plenty of affordable land, which has made it the place for warehouses, in which goods are stored until they get shipped out.

Inventory, transportation, and warehouse jobs accounted for 1 in 5 new positions created in the Inland Empire last year. Job growth is great, but these are not of the ideal type to help the average worker and the economy. Positions in this industry usually pay minimum wage, do not include health benefits, and provide no guarantee as to the number of hours an employee might expect to work in any given week. So, while employees are provided with some source of income, they lack job security and can never be fully prepared to adjust to the ever-changing demand for workers.

Temporary jobs like those in this sector have increased by 35% over the span of 5 years, growing faster than almost any other industry. While such jobs are difficult to keep, Kirkham shows that some who work quickly and efficiently are able to climb the corporate ladder and move from positions of warehouse laborer to inventory manager or sales representative. In the aftermath of the Great Recession, companies care more about precision and speed in order to cut inventory costs. This has caused warehouses to be more like short stops between the factory and the customer, rather than long-term storage spaces for goods.

The logistics industry is a necessary part of international and domestic trade. Goods need to be transported, sorted, and kept track of. The industry needs support, but so do the workers. Kirkham concludes the article with the following claim: the workforce is struggling. What changes might be made to keep the industry thriving while also helping laborers to gain some semblance of structure and continuity, rather than uncertainty and worry?

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Global Economy Feeling the Effects of America's Powerful Dollar

4/13/15 - Over the past nine months, the value of the dollar has increased dramatically, and Americans are loving it. While the average person is now able to get much further in other countries with the same amount of money as in previous years, Tom Petruno's L.A. Times article predicts that the dollar's raised value will have negative repercussions for the global economy and even the American economy in the long run. Devaluation of currency is becoming a trend around the world, and that will be bad for everyone.

The value of a euro has decreased by 25%, now at just $1.09, from $1.37 a year ago. In countries that don't use the euro, the difference is even greater: 30% in Sweden, 40% in Brazil, and 61% in Russia. This causes more Americans to change their vacation plans, leading to a preference for foreign, rather than domestic, travel destinations. While this is helpful in providing revenue for other countries, American tourist destinations like California and New York find it harder to bring in foreign visitors, as costs are rising from their perspective.

Petruno's research shows that the rising value of the dollar may not be due to an improvement in the American economy, but rather a devaluation of comparative currencies. When the currency of a country lowers in value, prices of goods go down, which causes consumers to purchase more of these “on sale” goods. Petruno believes that this phenomenon of devaluing currency is actually being assisted by federal governments in an attempt to increase demand and aid economic growth. Unfortunately, if this continues, each country will have to devalue their currency more and more to compete with each other, and America will be one of the only consumers in a sea of low prices, which will in turn harm the selling power of American companies.

Fortunately for Californian companies, a large amount of foreign investment comes from China. Since the value of China's currency has remained relatively steady compared to that of the dollar, Chinese tourists to the L.A. area have maintained a consistent degree of purchasing power. U.S. imports are up, and although the costs for these imports have lowered, more importing means less investment in domestic production.

U.S. companies lose money by reduced competitiveness against foreign companies, but more immediately, lose money due to the conversion factor between currencies. As the dollar's value goes up, and the value of foreign currency goes down, American companies are forced to accept less money from a sale than would have been earned previously. However, this has a lesser effect on the American economy as a whole, since the U.S. economy does not rely heavily on exports.

Although the value of the dollar is up, businesses are making less money because of the aforementioned competition and reduced foreign sales. Because of this, quarterly earnings are down, and stocks may begin to plunge because of it. Even in the European stock market, which has been on the rise, American investors receive reduced returns on their investments as the falling value of the euro removes some of the value of the stock.

Petruno concludes that the devaluation game is a slippery slope. Best-case scenario is that demand will move to other countries, improving the global economy without hurting American companies enough to start another recession. Worst-case scenario is that the currencies will be forced into a downward spiral, leading to debt defaults by foreign governments and leading to trouble in the economies of every country. Devaluation is a wild card, according to Petruno, and it can be difficult to predict exactly what will happen because of it. He concludes that it all may come down to whatever China decides —whether to give in to devaluation or keep up the value of its currency.

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Longshore Unions Provide Rich Benefits for Members

3/20/15 - If you were asked to list some types of people with jobs that pay over $100,000 per year, you might mention doctors, lawyers, and software engineers. Would you think to name dock workers? While many transit employees throughout the West Coast have been laid off or have seen their wages cut due to a recent increase in global trade, longshoremen (the laborers who move goods from the ship to the shore) have generally been able to protect their wages. In their article, Chris Kirkham and Andrew Khouri investigate the ways by which half of longshoremen on the West Coast make over $100,000 per year.

Not only do these many of these longshoremen make about $20 per hour on the low end, they earn even more on overtime and night shifts. It all comes down to the power of the International Longshore and Warehouse Union. As witnessed during last month's shutdowns up and down the West Coast, those who control the ports seem to control international trade. Even now that contract negotiations have been completed and the ports are open once again, it is predicted that the docks won't be back to normal for up to three months, and many businesses may never get back the money they lost during the port closure.

Although many members of the longshoremen union make well over $100,000 and all members receive free healthcare benefits, union spokesman Craig Merrilees claims that there are thousands of “casual workers” who are unable to get full-time work and don't get the benefits provided for union members. Merrilees states that these workers often spend years, without such benefits, trying to become a member of the union. Unfortunately, the Pacific Maritime Association, through which the wage statistics for union longshoremen were received, refused Kirkham's and Khouri's requests for the wage statistics of non-members, so Merrilees' assertions could be neither confirmed nor denied.

Longshoremen and the ILWU have a kind of monopoly on the ports. Not only did the port union leaders successfully create a contract in 1930 that linked most of the West Coast ports together, the unions have over the years been able to negotiate for better pay and benefits in the midst of technological improvements. Even the advent of such innovations as shipping containers, which require far fewer workers to transport, have led to better pensions and richer buyouts for those workers who are laid off due to the new technology.

The ILWU knows how to work the system. That appears to be how longshoremen are making so much money in a field where most workers make $10 - $11 per hour. When billions of dollars worth of goods pass through a set of ports each year, those people working the ports control the goods. The unions seem to be able to negotiate whatever contract they want, because companies need the ports in order to have any kind of international trade.

Slowly but surely, the unions may be losing their control. As computers systems and machines come in and replace employees, especially those doing clerical work, the unions may have trouble keeping benefits and high wages. While goods can be produced in other countries, and manufacturing can be easily outsourced, ports are a constant, unable to be moved somewhere with lower wages. Despite this, Kirkham's and Khouri's sources are confident that the high wages in the current low-wage transportation industry will not last. It's only a matter of time before technology and innovation force a change.

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Decreased Chinese Demand Harmful to American Exporters

3/6/15 - Labor strikes at ports on the West Coast and the current strength of the American dollar are both contributing greatly to exporters and other businesses that rely on exports. However, Don Lee claims in his Los Angeles Time article that China's slowing economy is causing even more damage to the American market. The strong dollar is not a good thing for most exporters because it makes their products more expensive overseas, in their target market.

While the U.S. economy as a whole seems to be pretty steady, many worry about the effects of significant Chinese withdrawal from American imports. Last year, American exports to China grew only 1.6% while American imports from China grew 5.7%. This trade deficit is bad news for scrap-metal exporters in California, Midwestern manufacturers, and cotton farmers in the Mississippi Delta.

As China's economic growth slows, amid increasing production around the world, China is forced to reduce foreign imports and focus instead on domestic businesses. Even American companies with locations in China are finding it difficult to compete with private Chinese contractors. Fortunately for America, the decrease in trade with China is being somewhat balanced out by increased exports to other countries, including Mexico and Canada. Trade, which has been involved in about one-third of America's economy in recent years, has started to become less-viable as an economic practice.

China is switching from a majorly goods-based economy to more service-based, and according to some of Lee's sources, this may not be a bad thing. Yes, it will have negative effects on businesses and companies reliant on imports and exports, but as a whole, the American economy does better off with services, like finance, accounting, and entertainment. Such service-based businesses are affected to a much lesser extent by the strength of the dollar, which is beneficial for everyone involved.

Besides the slowdown of China's economy, the Chinese president has been cracking down on corruption, forcing government officials to cut back on gifts and parties. Because of this, exporters of such products as fine wines and premium fruits have lost a sizable number of their usual customers. A combination of the new strength of the dollar and an increase in productivity by many countries has driven the prices of commodities down, which could hurt goods-based economies.

According to Lee, the export of agricultural products by California fell 9% last year, due greatly to China's changing economy. Farm shipments on their own plunged by 30%, and other products like grapes and nuts felt dramatic drops in price. The economy as a whole seems to be holding up, but it looks like it is just a matter of time before we are forced to make changes to our economy, or face devastating consequences.

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