Tencent Buys 5% of Tesla

Chinese internet giant Tencent has become Tesla’s 5th largest shareholder. They took a 5% stake in Tesla through the purchase of 8.2 million shares worth $1.78 billion. This is the largest investment so far of a Chinese company in the niche of self-driving vehicles.

A Tencent spokesperson said, “Tesla is a global pioneer at the forefront of new technologies including electric vehicles, assisted driving, shared vehicles, digitising real-world information, sustainable energy generation and scalable energy storage. Tencent’s success is partly due to our record of backing entrepreneurs with capital; Elon Musk is the archetype for entrepreneurship, combining vision, ambition, and execution.”

This investment by Tencent is in line with its vision that artificial intelligence will dominate the future. Tencent has an AI lab that has more than 250 people working in it. It intends to invest more in AI research that will allow the company to make innovations in the field of social media and gaming.

Zhang Tong, director of Tencent’s AI lab, said, “Tencent used to be a product-driven company. Now we want to transform into a technology-driven company. We’ve reaped the benefits of a large population, now we need to use technology and AI.”

Joseph Fath, a fund manager at T.Rowe Price, said, “Having Tencent as a partner helps position Tesla to launch the Model 3 in China. Tencent is one of the superpowers in China along with Baidu and Alibaba, and they clearly have a lot of backing from the government.”

Musk has referred to Tencent’s CEO as an adviser and mentor.

In 2016, more than 15% of Tesla’s revenues came from China. Tesla made more than $1 billion in China last year. This signifies the potential that China will become Tesla’s largest market.

Tesla has stores in Beijing, Shanghai and Guangzhou and is expanding the places where superchargers can be available such as hotels, shopping centers and restaurants.

Brian Johnson, a Barclays auto analyst, said, “Tencent’s passive stake is not only a vote of confidence in Elon Musk and the future of EVs, but also may help in accessing the Chinese market.”

Tencent started in 1998 and is known for its messaging behemoth, WeChat. Tencent has also invested in Nio, which is an electric vehicle startup. Tencent also has investments in NextEV , Didi Chuxing, and Future Mobility.

David Chao, co-founder of venture capital firm DCM, said, “Tencent’s philosophy is to just invest in the best companies in the world. Telsa and Tencent could create WeChat fan pages and communities to boost the company’s brand in China and integrate the app into Tesla cars. There are so many connections. It makes a lot of sense.”

Tesla produces the Model S sedan and the Model X sport utility vehicle. According to JL Warren Capital, Tesla exported 1356 vehicles to China in January and February of 2017.

Tesla’s Model 3 was unveiled last year in March during a late-night party in Los Angeles. Around 373,000 Model 3 cars were pre-ordered then.

March 30, 2017

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U.S. Home Sales Surge to 10 Month High

There are signs of robust demand for the U.S. housing market. Contracts to buy of previously owned U.S. homes has jumped to a 10-month high for the month of February. This is a good signal for spring which is historically the busiest season for the real estate market.

The National Association of Realtors said that based on the Pending Home Sales Index, it had increased 5.5% to 112.3. This is the highest figure since April 2016. This reflects the minimal impact from the current landscape of higher mortgage rates and higher home prices.

Lawrence Yun, NAR chief economist, said, “Buyers came back in force last month as a modest, seasonal uptick in listings was enough to fuel an increase in contract signings throughout the country.” The stock market’s continued rise and steady hiring in most markets is spurring significant interest in buying, as well as the expectation from some households that delaying their home search may mean paying higher interest rates later this year. Last month being the warmest February in decades also played a role in kick-starting prospective buyers’ house hunt.”

The forecasted existing-homes sales this year is around 5.57 million homes. This is an increase of 2.3% from last year. Also, the forecasted national median existing-home price for 2017 is expected to increase by 4%.

In the Northeast, pending home sales increased by 3.4% while in the Midwest it increased by 11.4%. In the South, it was up by 4.3% while in the West, it increased by 3.1%.

However, Yun said that this pending homes sales surge might not be sustainable as supply is not able to keep up with demand, particularly entry-level homes. Yun said, “The homes most buyers are in the market for are unfortunately the most difficult to find and ultimately buy. Affordability is not improving because home prices in some areas are still outpacing incomes by three times or more because of tight supply. How much new and existing inventory there is on the market this spring will determine if sales can reach their full potential and finally start reversing the nation’s low homeownership rate.”

A strong labor market is boosting demand for housing as the U.S. economy nears full employment and the labor market being able to create wage increases. However, supply constraints are pushing up home prices.

The current 30-year fixed mortgage rate is 4.23%. According to the Mortgage Bankers Association, applications for home purchase loans rose by 1.2% last week compared to the previous week.
Pending home sales last month has increased 2.6%, beating economists forecast of 2.4%.

The Atlanta Fed has a forecast of 1.0% GDP increase for the first quarter. The U.S. GDP increased by 1.9% in the final quarter of 2016.

The U.S. financial markets have not responded to this surge in pending home sales as they await further clues as to whether Fed will make more interest rate hikes for the remainder of 2017. Earlier this month, the Fed increased its benchmark overnight interest rate.

March 29, 2017

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Toshiba’s Westinghouse Files for Bankruptcy

Westinghouse Electric Co. has filed for Chapter 11 bankruptcy. This is due to cost overruns with it four nuclear reactors that are being constructed. This allows its parent company, Toshiba, to limit their financial losses.

This move will allow Westinghouse to decide whether it will continue the construction of the nuclear power projects for utility companies SCANA Corp and Southern Co.

Toshiba CEO Satoshi Tsunakawa said, “Toshiba concluded that a Chapter 11 filing was essential to rebuild Westinghouse.”

This filing for bankruptcy also ends the partnership between Westinghouse and Toshiba. In October 2006, Toshiba bought Westinghouse’s nuclear business for $5.4 billion and declared that that acquisition would lead to the dawn of a new era for nuclear energy. The backdrop then was high oil and gas prices. Also, there were movements to prevent global warming from worsening by capping carbon emissions.

However, the combination of Westinghouse and Toshiba has failed. Current Westinghouse-related liabilities has totaled to $9.8 billion as of December 2016. Toshiba has put its memory chip unit for sale to cover these losses. Toshiba is also forced to pull back from new nuclear projects that are currently being discussed in India and Britain.

This reorganization of Westinghouse will lead to complex negotiations between Toshiba, Westinghouse and the utility companies which are its main creditors. The deal will also bring into the picture the government loan guarantees by the U.S. government to help fund the nuclear reactors.

Westinghouse has already secured $800 million in financial assistance from Apollo Investment Corp for this period of reorganization.

Toshiba wants to find a buyer for Westinghouse, but there has been a scarce response to this. Two possible buyers would be Korea Electric Power Co., and Chinese nuclear construction company, KEPCO.

Jeffrey Merrifield, a former member of the Nuclear Regulatory Commission, said, “There is much value in that design going forward, and a lot of the challenges are being dealt with right now.” Merrifield said that there might be coalitions of U.S. companies that might want to purchase certain components of Westinghouse, which are the parts that design the reactor parts.

SCANA said that it is considering abandoning the project which is already a third complete.

Stan Wise, head of Georgia’s Public Service Commission said that the Southern Co’s nuclear project will likely be abandoned, which is now 36% complete.

Wise said, “There is a reason Westinghouse is exiting the process and bankrupt. Something told them the pain for them can only get worse. I hope there is a way for this process and contract to continue.”

20% of U.S. electricity is derived from nuclear energy. But it’s nuclear reactors are old with an average age of 35. Dan Aschenback, a senior vice president at Moody’s, said, “As these units get decommissioned, to stay at that percentage you need more units. But you can’t get there if you cannot construct it.”

Westinghouse said that their operations in Asia, Europe, Africa and Middle East will not be affected by this bankruptcy filing.

March 28, 2017

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Child Care Expenses Straining Family Budgets

Baby Sitter

According to a recent MarketWatch article, child care is placing a great strain on family budgets in the US. The July 2, 2016 report indicates that the accelerated cost of raising children is placing additional pressure on the family budget, causing the strain to spill over in day-care parking lots and even in the election debate of 2016.

The report states that child-care costs have doubled over other prices since the end of the recession in 2009. Along with the fast-rising costs of housing and minimal wage gains, families, who have young children, are focusing their attention on the current presidential candidates.

For example, the Democratic presidential candidate, Hillary Clinton, introduced a proposal in her campaign to limit the costs of childcare to 10% of a family’s income. The proposal represents a substantial cost reduction to families who currently pay one-fifth of their take-home pay on babysitters and nannies or to child care facilities.

Clinton has also proposed to expand access to a universal public preschool for children 4 years of age and the Head Start program. She also wants to offer child-care scholarships for parents who currently attend college.

Republican presidential candidate, Donald Trump, has not made any definitive child-care recommendations. However, he has indicated his interest in helping the middle class by initiating a simplified tax code and proposing lower taxes.

The major drawback for families, when it comes to paying for childcare, is the fact that the increased expenses have offset any income gains. Therefore, young families who have managed to meet other expenses are finding it hard to cope with the increased rates associated with childcare.

Often both parents have to work in order to meet their financial obligations. However, they often feel frustrated when they also must try to keep pace with the ever-increasing costs related to placing their child in a day-care center or securing a nanny. Therefore, along with international issues, child care expenses are also considered a campaign item in the 2016 presidential campaign.

August 8, 2016

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Payday Loans the Next Job Perk?

job perks

Governments across North America have tried to come up with ways to restrict, rein in or prohibit payday loan stores. Non-profit organizations, anti-poverty advocates, consumer groups and think-tanks have all released reports, launched protests or lobbied their public officials to accomplish the same feat. The results have been a mixed bag thus far.

The question ultimately is: what about the private sector? What have businesses done?

Over the last year or so, some startups and small businesses in the United States have incorporated payday loans into their employee benefits package. In other words, payday loans have become a job perk for the entire workforce, which may prove helpful in today’s economy.

The idea behind this move is that when employees are facing pecuniary difficulties in their private lives, then they may drag those problems into the workplace. This, according to some companies, could reduce overall productivity levels and have a case of presenteeism.

Well, one startup is joining the fray and making payday loans a perk for staff members.

For the last 18 months, Doug Farry, the co-founder of Employee Loan Solutions, has been having meetings with corporate human resources managers. This includes chambers of commerce and public officials with the goal of outlining one important fact: a large portion of workers live paycheck to paycheck, and they oftentimes turn to companies who offer same day loans online to pay the rent and light bill.

Some may view his plight as a way to raise wages. However, he is trying to get businesses to offer short-term, small-dollar loans, high-interest payday loans to their employees. According to Farry, employers know their workers can have financial matters clouding their minds at work.

“There’s a misperception among some business leaders that this is somehow a problem of the unemployed or homeless,” said Farry in an interview with the Los Angeles Times. “If you are a CEO making a seven-figure salary, this concept may not register with you.”

So, how does this program work exactly? Employees log in to TrueConnect and find out if their employer participates in the platform. Once they see the company they work for on the list, they can apply for an online payday loan that ranges from $1,000 to $3,000. These payday loans would be either approved or rejected immediately and would be available to all borrowers.

Essentially, this would be an add-on to all employees’ benefits packages.

Would this initiative please some consumer advocacy organizations? Not quite. Most efforts today want payday loans to have some form of underwriting, and the TrueConnect payday loans do not have this. For instance, many initiatives want payday loan businesses to be mandated to determine a borrower’s ability to repay. TrueConnect does not have this function.

Farry dismissed this concept, saying it would deter employees borrow from their employers.

“It has to meet the needs of the borrower,” he said. “We have talked to borrowers, and what they say is, ‘We need to know quickly. If I need to wait two weeks for an underwriting decision, I am screwed.'”

You may think that this would be a great opportunity for financial institutions. However, many banks in North America and Western Europe remain frightened of entering the small-dollar loan business. However, many financial institutions in Asia have embraced this market.

August 7, 2016

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How to Claim Job Search Deductions on Your Taxes

Looking for a job

While the job search costs incurred by a new college graduates are not usually deducted, they can be deducted if you worked enough in school to definitively establish an occupation. That information was recently presented in a recent MarketWatch article. According to the report, you have to show you have established an occupation in order to deduct expenses. Therefore, the costs involved in looking for first-time work are usually not considered deductible.

Deductible Expenses

You can also deduct the costs to look for a new job in the same industry when you are working temporarily in another job to meet your bills. For instance, maybe you lost your job as a software engineer but have taken a temporary job as a waiter. You can deduct the costs you incur while looking for employment in the software engineering field.

Common examples of job search expenses, considered deductible, include –

  • Employment agency fees
  • Employment counseling charges
  • Travel expenses (including 50% of meals when out of town)
  • Resume preparation fees

Also, if you drive your car locally in connection with a job search (or for job interviews), you can deduct the mileage allowed by the IRS, which is 54 cents per mile, as of 2016. The same holds true if you drive out of town when seeking employment.

However, keep one thing in mind – out-of-town transportation costs (whether by plane, auto or train) can only be deducted if the main reason for the trip is to search for a job. For example, if you fly out of town to stay at your sister’s house in Denver for a month and throw in some random employment searches, you cannot deduct the airfare to and from Denver.

Also, you cannot deduct the cost of a makeover, gym membership, haircut or new clothes, claiming they are related to searching for a ob. The same holds true for Internet access fees and mobile device services charges. Even if you use these serves to look for a job, the IRS will still say they are personal expenses that cannot be deducted. According to the IRS, you would have incurred these charges even if you had not been looking for a job.

Here is the major catch when it comes to employment search expenses – you must treat the entire amount of the costs as a miscellaneous itemized deduction. In other words, you receive no tax-saving advantages unless you itemize. Even when you do this, miscellaneous itemized deductions are only permitted when they exceed 2% of your AGI (adjusted gross income). They also have to be included with other specific miscellaneous deductions, such as fees for tax preparation and investment costs.

August 6, 2016

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