Daily Intent

600,000 foreigners are expected for the weeks of the Olympic Games.  And China estimates 4.5 million foreign tourists to pour into Beijing this year alone.  While expenditures are forecast to register $4.9 billion in revenue.

It’s understood with hosting the Olympics comes huge economic benefits to the host city, the surrounding cities and the country as a whole.  But the big question surrounding the monetary stimulus is its longevity.

Both Sydney and Athens experienced “post-Olympic depression”.  Their economies slouched after the Olympics passed through.

$4.9bn is a drop in the bucket in comparison to China’s overall economy.  It’s less than the write-downs of many American financial institutions of late.

So if the tangible tourist dollars spent in the country isn’t substantial, then where is the true economic benefit?

In BRANDING.

“It is all about symbolism” notes Tim Burroughs, editor of China Economic Review.

If the Olympics are a true economic success, Chinese companies will be the main beneficiaries of the Olympics.

Overseas (American, European, etc…) companies will have more confidence in investing in China.

China then will look to bolster its service industry, an industry making up only 30% of their GDP.  In other developed countries the service sector makes up 65-75% of GDP.

In this case, the Olympics would prove their long term support to China’s economy.

Should you be off to the Olympics to compete or cheer, I leave you with a little Mandarin:
“Bei Jing” = North Capital
“Xie Xie” = Thank you
“Ni hao ma” = How are you?
“De Shi” = Taxi
“Hen Gui” = Very expensive
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Seminar Updates: Next Tuesday night, August 12th, at 6pm, at my office I will be teaming up with Sarah Wildwood, Prudential CA Realty, to inform those interested in Short Sales.  If you are a prospective buyer you will benefit in understanding the process, the pros and cons, and time-frames of buying a short-sale.  Sellers, you too will benefit in understanding the ramifications, positive and negative, in electing this path.

A date has been set for the next Negotiation Seminar with Sean Mason.  August 25th at 6pm.  Mark your calendars.

Word of the week: Pac-Man Defense

“A defensive tactic used by a targeted firm in a hostile takeover situation. In a Pac-Man defense, the target firm turns around and tries to acquire the other company that has made the hostile takeover attempt. This term has been accredited to Bruce Wasserstein, chairman of Wasserstein & Co.

This term comes from the Pac-Man video game. In the game, once Pac-Man eats a power pellet he is able to turn around and eat the ghosts that are chasing after him in the maze.

When one company makes an unsolicited and aggressive bid on another publicly traded company, the takeover attempt may not be welcomed by the targeted firm. In an attempt to scare off the would-be acquirers, the takeover target may use any method in an attempt to acquire the other company, including dipping into its war chest for cash to purchase the other company’s stock.”  -Investopedia

Six points to ponder:
1.  The Fed held rates steady at 2% on Tuesday.  Your lines of credit, credit card rates, etc… will remain steady.
2.  Freddie Mac reported over $800m in write-downs.  Fannie Mae set to report Friday.
3.   Oil prices continue their fall from the record highs.  Current price = $119.80
4.  Hugo Chavez, Venezuelan President, continues his power hungry efforts.
5.  Nick and Hayley Mullen, and Brett Favre, are off to the Big Apple.
6.  The Summer Olympics commence tomorrow!
Positives:
     The Fed understands the significance of leaving rates unchanged.  The low rates are not seen as bolstering the economy forward, rather supporting the economy in an ever shaky time.  Moreover, inflation, though high for normal standards, has stayed in check.  Lowering oil prices should continue to aid in supporting the economy and suppressing outlandish inflation.
The battle between country’s athletes!  Ever since I can remember I’ve always basked in the pride of watching the American Gold Medal count.  Phelps and his 8 Gold Medal hunt!  US Men’s basketball reclaiming its dominance!  US Women’s soccer looking to dethrone Brazil!  100m dash: who is the fastest man in the world?  Tyson Gay or the Jamaicans?
Negatives:
Alt-A loans, 20% of Freddie’s portfolio, made up for 80% of their write-downs.  These loans were made to solid credit borrowers, but in the form of stated income.  My opinion, these borrowers got a little ahead of their skiis in believing they were savvy investors and the lenders didn’t take into consideration the market cycles.  Careless on both ends.  It’s a shame.
Socialism, may work for some countries, however Hugo Chavez’s continued abuse of people’s rights, saddens me.  Decrees he’s making: “…empower Chavez to expropriate goods from private businesses and increase state control over food, punishing business owners who fail to comply with price controls with fines, closure and even 10-year prison terms.”…”The decrees came down just as the Supreme Court, whose justices were appointed by the Chavista-dominated National Assembly, on Tuesday upheld a decision by Venezuela’s top anti-corruption official to bar 272 mostly opposition-aligned candidates from running.” AP News Ian Jones