Knowledge is Power: Economics is Useless? Edition

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1.The economics profession must bear a lot of the blame for the current crisis. If it is to become useful again it must undergo an intellectual revolution—becoming both broader and more modest. Goodbye, homo economicus

2.By one definition, a 21% rise in the Dow index makes this a three-week old bull market. The rapid change of heart might indicate that lessened financial stress will soon bring happier times. But even if panic is no longer called for, sharp profit falls could restrain enthusiasm. Bull market looks premature (Registration Required)

3.While we routinely mourn the disappearance of the small storefront, we rarely ask what happens to the texture of a city when a big-box store closes shop.What should we make of empty big-box stores?

4.Times are tough in Korea and they are bound to get even tougher as the country gets whiplashed by the global financial crisis. Kim Bong Suk, the chief economist at Shinhan Bank’s Future Strategy & Business Development Institute, discusses with The Asset what this means in terms of capital…  In dire straits

5.The world’s 11th-largest economy is still attracting international interest, though not everyone is dancing for joy as Brazil poises for more growth. Emerging markets: The Brazilian play

Photo: A beach in Maldives

A Look at Tesco: The Top British Retailer

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Similar to Wal-Mart (WMT) being the largest retailer in the USA, Tesco Plc (TSCDY) is the largest grocery and general merchandising retail chain in the UK based on both sales and profit measures.tesco

Tesco together with Asda, Morrisons and Sainsbury’s (“Big 4”) have a 75% share of the grocery market in the UK as of November, 2008 (Source: Wikipedia). In the UK, there are 2,184 Tesco stores employing 280,000 workers with a market share of 30.3%. In 2008, Tesco also became the fourth largest retailer in the world. Tesco operates in other countries such as France,Thailand, Turkey, Ireland, Hungary, the USA, etc. In the US, it runs the “Fresh&Easy” stores on the west coast.

Tesco ADR (OTC: TSCDY) trades in the OTC markets.Last year Tesco’s total revenue was $72B. The retail sector has one of the lowest profit margins when compared to other industries. However Tesco has a profit margin of 4.44% which relatively higher than other grocery retailers such as Ahold(AHONY) of the Netherlands (2.35%) and Kroger(KR) in the USA whose margin is just 1.61%.

Tesco’s current yield is 2.38% and the annual dividend growth is 12%. Total revenues has also increased consistently since 2004 at rate of 13% annually.Tesco was one of the picks mentioned in a recent MarketWatch article titled Ten investment ideas that will make you money in 2009.

One of the biggest positive factor about Tesco is its concentration on international growth especially in China and other Asian countries. The UK accounts for just 46% of total sales as shown in the chart below:

tesco sales

Sales growth in 2008 were as follows:
Asia – 27.2%
Europe – 23.9%
UK – 6.7%

Chart – International Sales and Number of Stores:

Tesco Stores

Source: Tesco PLC Annual Report and Financial Statements 2008

Overall as a top company in a defensive sector, Tesco is one of the few attractive companies in the the UK economy which continues to deteriorate. For investors who are looking for a strong multi-national company in these recessionary times, Tesco is one option to consider.

It should be noted that Asda, the 2nd largest retailer in the UK, is owned by Walmart.

Disclosure: None

Knowledge is Power: George Soros and Meltdown Edition

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1.George Soros: Britain may have to seek IMF Rescue...George Soros, the man who broke the Bank, sees a global meltdown.

2. The Inter-American Development Bank could easily double its annual lending, given the global financial crisis, Luis Alberto Moreno, the bank’s president, said ahead of an expected call on Sunday on the bank’s shareholders to grant it its ninth capital increase since its inception 50 years ago. IADB confident on increased lending

3.Mining investment in Chile and Peru is expected to recover this year as global financial turbulence eases and metals prices start to climb.Investment in world’s largest copper mining countries to pick up again this year

4.Unlike in the previous crises, governments across the region are highly pro-active in overcoming the downturn as they unveil stimulus packages – one estimate puts their pledges at close to US$700 billion – to keep their economies going. At the same time, the central banks are aggressively cutting interest rates, although in several countries there is little room left for rate reductions.US$700 billion and counting …

5.Accidents can happen Nasty accidents can happen when the US government pumps into the economy extra funds to half of the value of what the country makes in a year. Among them, mere fear of deflation can turn into the real horror of runaway inflation.

Knowledge is Power: Wage Deflation Edition

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1.Australia’s banking sector is being tipped to emerge stronger than in recent years. Runaway wreck stalling; time for the clean-up

2.  Stocks that Matter: BP Continuing our series looking at the most popular stocks in the portfolios of UK Unit Trusts and OEICs, we turn our attention to BP.

3.Wage Deflation Sets In– From MISH’S Global Economic Trend Analysis

4.http://a123.g.akamai.net/f/123/12465/1d/www.montrealgazette.com/business/broke_getty.jpgConsumer bankruptcies in Canada spiked sharply in January, the beginning of what credit experts warn could be a wave of bankruptcies this year that are the inevitable result of rapidly rising unemployment. More Canadian go bust

5. Commentary: Those in the financial echo chamber still don’t get it – Memo to Wall Street: America hates you

China Railroad ADR: Guangshen Railway Co

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Guangshen Railway Co (GSH) is the lone foreign railroad listed in the New York Stock Exchange other than the Canadian railroads.

From the Wikipedia:

“Guangshen Railway Company Limited operator of Guangshen Railway, the 152-kilometre railway link between Guangzhou and Shenzhen in Guangdong, China. The company is engaged in railway passenger and freight transportation businesses between Shenzhen and Pingshi and certain long-distance passenger transportation services. It also cooperates with MTR Corporation Limited in Hong Kong in operating the Guangdong Through Train passenger service.”

Shenzen was the first Special Economic Zone that was established by China. With the establishment of many export-oriented factories and hi-tech companies, Shenzen ultimately became very successful in economic growth.

GSH has a market cap of just $489M. The current dividend yield is 3.52%. Last year the company had a revenue of $1.7B. After trading at a high of $30 early last year, the stock fell in sync with the overall markets. Today the stock closed at $17.10.

There have been news reports that China’s stimulus plan is working.However GSH will get more business only when the international export sector improves. It is definitely worth keeping an eye on this railroad stock from China.