Penn Wealth Publishing

2015.06.14 Journal of Wealth & Success Vol 3 Issue 23

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14 wealth & success volume 3 issue 23 June 14, 2015 wealth & success Copyright 2015. All Rights Reserved. weekly business rePort Weekly Business Report Uncover Your Passion. chinese growth continues to slow; trade at lowest level since 2008 Financial crisis One economic component we look at every morning is the price of various precious metals. We do this because materials such as gold, sil- ver, and platinum are not priced in a vacuum—a change in their values almost always indicates an underlying condition. On Monday morning, we noticed that the futures price of palladium for June delivery fell $26, from $802 to $776 per ounce. That is of interest, because over half of the world's supply of palladium ends up in catalytic converters—automotive devices that convert harmful exhaust pollutants into more benign sub- stances. Diving a little deeper into the drop, we find that auto sales in China fell to their weakest levels in over two years—a further indication of the communist-led nation's cool- ing economy. Further evidence of slowing came in the Chinese central bank's decision to lower interest rates for the third time in six months in an effort to spur activity. It also announced that banks would be given more flexibility in setting rates they pay on depositors' money. Ironically, the state-owned banks affected by the decision loan most of their money to state-owned companies. Chinese trade data, while nowhere near as bad as the figures released in the US last week, showed that exports fell by 6.2% in April from April of 2014, following a 15% decrease March over March. Forecasters had predicted a 2.4% year over year gain in the April num- bers. Unfortunately—and this is where China's data disconnects from the US'—mainland imports fell 16% in April from last year, meaning the country still had a $34 billion surplus for the month. On the global front, bad economic news for China spells rotten news for one of our great allies, Australia, which relies heavily on commodity exports to the country. The Aussie dollar fell to session lows on the trade report. China's economy grew by 7.4% last year, its slowest pace in a gener- ation, and Beijing expects a 7% growth rate for 2015. France really is a socialist haven: government buys more shares oF air France to increase its role at airline Those rascally French. Just when it looks like there might be some hope, they go and totally redeem their leftist credentials. Last Friday, the government announced that it would begin raising its stake (yes, the government's stake) in Air France-KLM to 18% to increase its activist role in the company. Alternative reality time. How about ending the charade (ironically, a word they created) and just take ownership of the entire company. The US government runs a train company, and we all know what a well-oiled machine that is. At the heart of the issue is the government's ability to hold veto power at the air carrier's share- holder meetings—they don't have it, but they want it. Just last month, the French economic minister orchestrated a €1.2 billion purchase of Renault SA shares so it could defeat a resolution the board of the automaker was about to pass, but one the government didn't like. The defeated resolution would have ended the practice of giv- ing longtime shareholders, like the government, double voting rights (no joke). In the case of Air France, the government's aim is ostensibly the same: upholding the double-vote rule. But the desire for corporate control runs deeper than the ability to vote twice with one share. Renault's CEO, Carlos Ghosn, put up a vigorous fight against the government intrusion in a private company, only to lose. It does not appear that Air France-KLM is readying such an attack. That is interesting, as the KLM portion of the airline is Dutch (they merged with Air France in 2004), and that wing has enjoyed a large degree of auton- omy, to include a separate company headquarters in Holland. The new share purchases by the gov- ernment of France (with French taxpayers' money) risks upsetting relations between the two nations, though the Dutch response has been muted thus far. The double-voting rights issue is a scheme devised by the French government to thwart foreign investors from controlling too much of a French company. That is power reserved, obviously, for the government. French President Francois Hollande

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