Archive for the ‘Investing’ Category

Shocking! Study claims IKEA is confusing customers into submission!

January 24, 2011

Alan Penn is Professor of Architectural and Urban Computing at The Bartlett School of Graduate Studies, University College London, and Director of the VR Centre for the Built Environment. He has studied IKEA’s London store and draws the (un)remarkable conclusion that the layout has been cunningly designed – horror of horrors – to get customer’s to buy more.


(I hate that word but cannot find a better one)

The Scotsman reports:

IKEA Wembley store

Study claims Ikea’s ‘maze’ is selling ploy

Professor Alan Penn, director of the Virtual Reality Centre for the Built Environment at University College London, studied the Swedish firm’s north London store and came to the conclusion that their success, in part, is down to confusing their customers into submission by designing their stores like a maze.

Unlike John Lewis stores, which have a grid layout to create an open and accessible environment, Ikea stores require customers to enter and follow a path through the entire store to reach the exit.

“It is so well done and so cunningly done that I have little doubt that it is intentional,” said Penn, whose team has previously studied retail strategies and monitored how consumers respond.
In his study of the Ikea store in Brent, Penn found that the weaving yellow path quickly leaves customers disorientated. It only takes minutes before they have no idea where the exit lies, he found. Although all stores are required to include shortcuts for fire regulations, he said these were always positioned outside the customer’s normal field of vision.
Penn said the only comparable shopping environment he knew of was the Bazaar in Isfahan, a medieval Iranian marketplace. “The way to the exit is always behind you,” he said.

Obviously  John Lewis and other proper UK stores would not stoop to such despicable tactics ! In the words of one of the comments to this article:

I do think it is important for customers to stand up to the evil nordic fascist monsters who run Ikea.

Footnote from the Wall Street Journal:

Swedish furniture giant IKEA, the world’s No. 1 furniture retailer by sales, said Friday it benefited from cash-strapped consumers trading down in a continued challenging economic climate, as it reported higher sales and net profit for fiscal 2010. The company, famous for its low-cost ready-to-assemble furniture, said net profit for the fiscal year to Aug. 31 rose 6.1% to EUR2.7 billion. Revenue rose 7.7% to EUR23.1 billion.

Prices were unchanged in fiscal 2010 although Ohlsson said the company has been able to reduce prices by 2.6% in the current fiscal year and sees the possibility of further prices cuts next fiscal year. IKEA’s improved supply chain is key to maintaining low prices while also bucking the trend of other retailers by boosting margins. Gross margin rose to 46.1% from 44.6% a year earlier.

I wonder who funded this study? A competitor to IKEA? or could it be IKEA?

IKEA is still a privately held company – so I won’t be buying shares after this study – but I would if I could.


Coal India looking to acquire mines in US, Australia and Indonesia

November 13, 2010


State-run Coal India (COAL.BO) is in talks to buy mines from U.S.-based Peabody Energy and Massey Energy , according to a media report citing the company’s chairman. “They expressed interest in offering certain mines to us and we are looking at that,” Partha Bhattacharyya said in a report by the Associated Press carried in the Economic Times newspaper on Saturday. “The discussions are continuing,” the report quoting him as saying. He declined to provide further details.

The Economic Times:

Coal India has budgeted $1.2 billion to buy assets in the US, Indonesia and Australia during the year ending March as it battles a widening gap between domestic coal supply and demand. The company, which last month raised $3.4 billion in the nation’s biggest-ever initial public offering, has near-monopoly control of India’s coal market. Indian companies are increasingly turning to the US to secure vital commodities to fuel the nation’s breakneck growth.

This year, Reliance Industries — India’s most valuable company by market value — bought stakes in three US shale gas companies for a combined $3.4 billion, the largest Indian investment in the US ever made. In 2007, India’s Essar Group acquired Minnesota Steel and is investing over $1 billion to build two plants and run its iron ore mine near Nashwauk, in northern Minnesota. This March, the company spent $600 million to acquire US-based Trinity Coal with mines in Kentucky, West Virginia.

St Louis, Missouri-based Peabody Energy says it is the world’s largest private sector coal company, with 9 billion tonnes of reserves. Richmond, Virginia-based Massey Energy says it is the largest coal producer in the Central Appalachian region, which accounted for 20% of United States coal production in 2007.

US shale gas challenges Russian natural gas in Europe

November 12, 2010
Natural gas pipelines from Russia to Europe.

Natural gas pipelines from Russia to Europe: image via Wikipedia

“Peak gas”  like “peak food” and “peak resources” and like all “peak scenarios” keeps getting postponed. The US is awash with shale gas and has started re-exporting LNG it had contracted for to Europe challenging the dominance of Russian supplies of natural gas.

Money control reports:

The United States may play a role this winter in loosening Russia’s grip on the European market for natural gas by shipping liquefied natural gas across the Atlantic. Awash with domestic shale gas and with little need to import extra fuel, the United States has started re-exporting LNG cargoes, which firms had previously imported under contract, to countries where gas prices are much higher.

Such shipments could contribute to a growing pool of cheaper LNG going to Russia’s biggest export market this winter. In the longer term, U.S. plans to build plants to liquefy shale gas could create another rival to Russian pipelines. The first re-export cargo from the United States to Britain — a key access point for LNG into northern Europe via an Interconnector pipeline to Belgium — is set to sail over the weekend. “It is a landmark shipment,” said Zach Allen at NATS LNG analysts in Raleigh North Carolina. “LNG has, through the Interconnector, played a major role in reducing intake of Russian gas into western Europe.”

U.S. shale gas has already forced many LNG producers that had hoped to supply the North American market to find alternative buyers, with many cargoes ending up in Europe and driving spot gas prices below the price of oil-indexed Russian gas.

US re-exports to Europe are the latest sign that increases in shale gas production have transformed the global gas market. The International Energy Agency said on Tuesday that a decade-long period of oversupply was likely to push oil-indexed gas sellers to accept lower prices.

In February, Russian gas export monopoly Gazprom postponed it’s Shtokman LNG project because the United States, its target market, did not need more imports. Major European pipeline gas supplier Statoil has been forced to find alternative markets for LNG it had hoped to send to the United States, often selling it into Europe. Qatar, the world’s largest producer and exporter of LNG, has also pushed into both Norwegian and Russian markets by making large deliveries of cheap LNG into Britain and Belgium. US LNG imports have fallen to contractual minimums as gas prices have sagged, forcing importers whose terminals are sitting idle to change strategy and re-export to make the most of higher prices overseas.

US gas at USD 4.1 per million British thermal units (mmbtu) was about USD 3.3/mmbtu below UK prices on Tuesday and just under half the price of Russian gas in Europe in October, according to International Monetary Fund data. About 20 billion cubic feet of gas has already been re-exported from the United States this year, with some sent to Asia, where buyers have paid nearly USD 10 per mmbtu, and some to Latin America and the Middle East.

More of those US loaded cargoes could head to Britain over coming months, given that winter price increases are sharper in northern Europe than in the United States and that imports by South American and Middle Eastern buyers are usually confined to summer.

“US exports to Europe will remain rather exotic, but they underline once again the big risks for Russia of focusing some of its future projects on US markets,” said Valery Nesterov, energy analyst at Moscow-based Troika Dialog brokerage.

Cheniere Energy, operator of the Sabine Pass import terminal in Louisiana, announced plans in June to build a liquefaction plant at the terminal. It said on Tuesday that US bank Morgan Stanley hoped to secure some of its export capacity. Pending approval, the plant would export US-produced shale gas to markets all over the globe from 2015. It would be the first US LNG export plant in 40 years — following the old Kenai facility which supplies Asia from Alaska — and would be well placed to supply Europe. “LNG supplies from the United States can help lower gas prices in Europe and Asia and ultimately help lift prices in the States,” said Mikhail Korchemkin from Pennsylvania-based East European Gas Analysis.

G20 kicks off today and currency war fears dominate

November 11, 2010

As countries jostle to weaken their currencies to stimulate growth, this G20 meeting in Seoul, Korea may not achieve much new. All agree that other countries should not engage in currency manipulation but each country wants to retain the right to do so. My reading is that if currencies followed the actual situation on the ground then the Dollar and Chinese Yuan ought to appreciate, the Yen should depreciate and the Euro should stay roughly where it is balanced between the German strength and the Ireland effect. The Indian Rupee and the Brazilian Real are probably undervalued as well.

Alan Greenspan continues to have his unsettling effect on the world economy.

"YES" Currency symbols sculpture:


Rancorous debate over global economic imbalances and currency strains dogged the G20 as world leaders gathered for a summit in Seoul on Thursday despite U.S. efforts to shore up the group’s unity. Behind the scenes, negotiators squabbled over the language in a closing statement to be issued at the summit’s conclusion on Friday. The final version may not venture far beyond agreements reached by G20 finance ministers last month, yet it was still proving difficult to agree on the wording.

A major irritant in the run-up to the meeting was the U.S. Federal Reserve’s bond-buying spree to revive the economy. Former Fed Chairman Alan Greenspan stirred that pot, saying the United States was pursuing a policy of weakening the dollar.

“The U.S. will never do that,” U.S. Treasury Secretary Timothy Geithner shot back a few hours later in an interview with CNBC. “We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”

China’s yuan, also known as the renminbi, rose 0.25 percent on Thursday and has climbed almost 3 percent since Beijing loosened its grip on the tightly managed currency in June. Washington has welcomed the slow-but-steady appreciation, although it has said more movement is needed.

Mount Merapi rumbles on while Anak Krakatau crater expands and Obama flies in to Jakarta

November 9, 2010
A closer look at Anak Krakatau

Anak Krakatau: Image via Wikipedia

Yogyakarta’s Adi Sutjipto domestic and international airport has been closed until at least next Monday Nov. 15, at which time another decision would be made. Despite the ban on civilian and commercial flights in and out of Yogyakarta, the Indonesian Air Force was still operating Hercules flights to deliver aid to the internally displaced.
More than 300,000 people are believed to be housed in government shelters.

Indonesian rescue workers resumed efforts to retrieve bodies of victims from an eruption of Mount Merapi in central Java on Nov. 5, after surface temperatures forced a halt to the search on Monday. More than 320,000 people are housed at evacuation centers outside the 20-kilometer safety zone in four regencies in Yogyakarta and Central Java provinces, the National Disaster Management Agency said in a statement on its Web site today. Evacuees reached 280,000 people yesterday.

“Volcanic activity is relatively stable this morning compared with yesterday,” said Oka Hamid, a spokesman at Red Cross Indonesia’s Yogyakarta branch. “We recovered two remains in one village but we have to leave another four as the field is hard to reach and they’re all covered with thick ash.”

Meanwhile –

The crater of Anak Krakatau in the Sunda Strait has expanded to a diameter of 25-26 meters, an Indonesian volcanologist says. The news comes as the frequency of eruptions of the volcano, once misidentified as Krakatoa, increases: On Friday there were 615 eruptions, on Saturday 623 eruptions, and on Sunday 668.
Anton S Pambudi, a official from Banten province monitoring the eruptions, said the eruptions over the past two weeks had changed the shape of the crater. Authorities have warned that several other volcanoes in Indonesia are showing increased signs of activity. These include Mount Karangetang on Siau Island in North Sulawesi and Mount Ibu on Halmahera Island in North Maluku.

Banten Governor Ratu Atut Chosiyah said she believed that Anak Krakatau did not pose a threat and that the eruptions, which can be seen from the western tip of Java Island, were interesting to observe.

Philippine Airlines Inc., Emirates, Eva Airways Corp. and Valuair Ltd. resumed flights to Jakarta on Monday after suspending them for two days, PT Angkasa Pura, the Soekarno-Hatta international airport operator said on its Web site. Singapore Airlines Ltd., Cathay Pacific Airways Ltd. and Japan Airlines Corp. restarted services on Sunday.

President Obama arrives in a few hours in Jakarta.

Carbon Trading dies quietly in the US; time for Europe to follow suit

November 8, 2010

From Pajamas Media:

Global warming-inspired cap and trade has been one of the most stridently debated public policy controversies of the past 15 years. But it is dying a quiet death. In a little reported move, the Chicago Climate Exchange (CCX) announced on Oct. 21 that it will be ending carbon trading — the only purpose for which it was founded — this year.

Although the trading in carbon emissions credits was voluntary, the CCX was intended to be the hub of the mandatory carbon trading established by a cap-and-trade law, like the Waxman-Markey scheme passed by the House in June 2009.

At its founding in November 2000, it was estimated that the size of CCX’s carbon trading market could reach $500 billion. That estimate ballooned over the years to $10 trillion.

The CCX was the brainchild of Northwestern University business professor Richard Sandor, who used $1.1 million in grants from the Chicago-based left-wing Joyce Foundation to launch the CCX. For his efforts, Timenamed Sandor as one of its Heroes of the Planet in 2002 and one of its Heroes of the Environment in 2007.

CCX’s panicked original investors bailed out this spring, unloading the dog and its across-the-pond cousin, the European Climate Exchange (ECX), for $600 million to the New York Stock Exchange-traded Intercontinental Exchange (ICE) — an electronic futures and derivatives platform based in Atlanta and London. (Luckier than the CCX, the ECX continues to exist thanks to the mandatory carbon caps of the Kyoto Protocol.)

The ECX may soon follow the CCX into oblivion, however — the Kyoto Protocol expires in 2012. No new international treaty is anywhere in sight.

While we don’t know how well Al Gore and Goldman Sachs fared on their investments in the CCX, we do know that there’s no reason to cry for Sandor. He received $98.5 million for his 16.5% stake in CCX when it was sold. Not bad for a failure that somebody else financed.

Carbon Financial Instruments – Nov 5, 2010

Product Vintage Open High Low Close Change Volume
Total Electronically Traded Volume
CFI 2003 $0.00 $0.00 $0.00 $0.05 0
CFI 2004 $0.00 $0.00 $0.00 $0.05 0
CFI 2005 $0.00 $0.00 $0.00 $0.05 0
CFI 2006 $0.00 $0.00 $0.00 $0.05 0
CFI 2007 $0.00 $0.00 $0.00 $0.05 0
CFI 2008 $0.00 $0.00 $0.00 $0.05 0
CFI 2009 $0.00 $0.00 $0.00 $0.05 0
CFI 2010 $0.00 $0.00 $0.00 $0.05 0
Price and volume reported in metric tons CO2

Coal still king as green power IPO struggles

November 4, 2010

Black vs. green. Wikimedia commons

“Green” is no longer as fashionable and trendy as it used to be. The slime of Climategate has had its impact as has the arrogance of the alarmists. But if the hard-headed world of business investments is anything to go by it seems “black” is begining to trump “green”. An earlier post described the huge success that Coal India’s IPO had. This needs to be contrasted with the tepid response to the the IPO for ENEL Green Power which also listed today.

Waning investor interest in clean energy contrasted sharply with enthusiasm for coal on Thursday as shares in Enel Green Power fell on their debut while Coal India’s soared.

Enel Green Power (EGP), which generates clean energy from hydro and geothermal to wind and solar and is Europe’s biggest listing since 2008, dropped over 4 percent on its debut despite a cut price offered to lure investors.

Shares of Coal India, a similar sized share sale at around $3.5 billion, gained 40 percent in Mumbai on the same day.

“The struggle for renewables reflects the fact that they are quite capital-intensive, in a world that is capital-constrained, and face regulatory uncertainty,” Robert Clover, alternative energy equity analyst at HSBC said.

India, which has the world’s fifth biggest coal reserves after the United States, Russia, China and Australia, is riding an economic boom that is thirsty for fuel.

“Fundamentally, Coal India is a structural play on India’s rising energy demand,” said Binay Chandgothia, chief investment officer at Principal Global Investors in Hong Kong.


Europe has seen a resurgence in public offerings as equity markets trade around 6-month highs, and many European companies have managed to get their initial public offerings toward the upper end of their price guidance.

But EGP’s parent company Enel, an Italian power giant that also controls Spain’s Endesa, struggled to woo professional investors for the sale of up to a third of its renewable unit against a backdrop of underperforming green energy stocks

It was forced to cut the price to 1.6 euros a share from a price range of 1.8-2.1 euros, and early guidance of 1.8-2.4 euros, raising only 2.5 billion euros ($3.5 billion) compared with the 3 billion euros it had wanted to help reduce debt.

Institutional investors had raised concerns over EGP’s lower growth rate versus peers, its lack of a track record and uncertainty on green energy incentives, despite its wider geographical footprint and technology mix.

The Italian power giant, which also controls Spanish utility Endesa, eventually managed to get the deal away thanks to interest from retail investors, but it will raise less than its 3 billion euro ($4.2 billion) target, key to cut debt.

Even after the price cut, shares fell over four percent both in Milan and Madrid on the first day of trading.

“”In any jumbo IPO you want it to trade up so that you can say the market has a good feeling about it, but I don’t think a lot of people expected this to trade well given how much went to retail,” said a source close to the deal.

By contrast, an attractive IPO valuation for India’s dominant coal miner spurred demand from investors who applied for more than 15 times the number of shares on offer in the country’s largest-ever IPO. Enel Green Power IPO was just 1.1 times covered.

The Coal India listing comes at a time of record foreign fund inflows into Indian stocks and in one of the best years for IPO fundraisings for the country.

Sexy Coal India shares list with an opening gain of 32%

November 4, 2010


Bombay Stock Exchange

BSE: Image via Wikipedia


The Coal India IPO where the Government of India divested 10% of its shares in the worlds largest coal producer was massively oversubscribed. The share price was set at 245 Rs at the top of its offer range of 225 – 245 Rupees.

The shares were listed today and the price immediately zoomed to 324 Rs showing an opening gain of 32%.

The Economic Times reports:

The world’s largest coal producer today listed on the bourses with a handsome premium and zoomed over 32 per cent, over its IPO issue price of Rs 245 per share, to hit a high of Rs 324.75 in the first hour of trade on the Bombay Stock Exchange.

Partha S. Bhattacharyya, Chairman & MD, Coal India Limited says, “Many records have been broken and many peaks have been scaled. For the officials intensely involved in the process, the feeling largely resembles to that of a mother who has just given birth to a child. Indeed it is a moment of birth in the capital market that brings in huge responsibility on the management to rear the newborn baby into a strong and mature turnout by living upto the expectations of the investing community consistently.”

Prasad Baji, Senior VP, Edelweiss says, “Technically Coal India’s valuation is running not just as a coal company but since its model is different, it is selling in India where there is an assured offtake and its pricing will never see a price tag, therefore, it is not typically a commodity play as compared to other coal companies.

Investors included Janus Capital, Fidelity, Franklin Templeton and Capital International. Domestic investors included State Bank of India , ICICI Bank and Life Insurance Corp. Maximum subscription was in the high net worth category with subscription of around 25 times. Amit Aggrawal, a financial services executive who borrowed Rs 90 million to bid for Coal India shares, says that he would take some profits off the table at Rs 320 a share. “I may hold back some shares and sell them at a later stage,” says Mr Aggrawal.

Coal India IPO: Coal becomes sexy again

October 23, 2010

Coal India Limited (CIL) is an Indian state-owned coal company headquartered in Kolkata, West Bengal, India and the world’s largest coal miner with revenue exceeding Rs 45,797 Cr or $10.3 billion U.S. (FY2008-09). It is owned entirely by the Union Government of India, under the administrative control of the Ministry of Coal.


Coal India Ltd.: Reuters graphic/ Christine Chan


As part of its divestment programme to raise about 9 Billion$, the Government of India has put up  10% of Coal India Ltd. in an IPO conducted this week. If priced at the top of its 225-245 rupee price range, the IPO would swell Government coffers by about 3.5 Billion$ and Coal India would have a market value of $35 billion, ranking it seventh among listed Indian firms. As the Economic Times puts it “The response to the Coal India (CIL) initial public offering (IPO) that finally closed early Friday morning, after lead managers were forced to extend the time limit to deal with a deluge of applications, has been phenomenal. Against the issue amount of Rs 150 billion, bids came in for Rs 2.54 trillion and the final total could be higher.
While retail investors seem to have been relatively circumspect — the retail portion was over-subscribed only 2.32 times — and employees even more so — the employee portion was not fully subscribed — both institutional and highnet-worth buyers seem to have participated with gusto.”


coal mine in India

Open cast coal mine in India: Image via Wikipedia


While a portion of the shares were held for employees the mining unions discouraged their members from applying. But with the opening price when the shares list on November 4th expected to be around Rs 300 – 320 there is a backlash among the union members who are going to have lost out. The institutional portion was oversubscribed 25 times.

Coal India has reserves of about 277 billion tonnes of which around 60 billions tonnes are currently recoverable by open cast mining. Current annual production is about 400 million tonnes and expected to rise to about 650 million tonnes in 5 years. India currently imports about 100 million tonnes of high grade coal mainly for steel making. Coal India has a major investment programme ongoing for the installation of coal washeries to improve the notoriously poor quality (high levels of abrasive ash) of Indian coals. Most Indian coals have very low values of Sulphur content so that sulphur dioxide emission is not a major concern.

The enormous interest of the institutional investors – both from within and from outside India – is a healthy indicator that simple business considerations rather than pseudo-environmentalism is still the governing factor.

Gold fever

September 15, 2010
Mojave Nugget, a gold nugget weighing 156 ounc...

Image via Wikipedia

The price of gold hit a record high on Tuesday, with analysts giving a number of reasons for its rise.

Gold generates no income. It costs to store and secure and insure. Yet the flight to gold continues. Gold only beats inflation. It fares poorly when compared to real estate or shares when compared on the basis of real inflation adjusted returns. Gold scores the highest in terms of liquidity, compared to all other investments. Gold can be converted to cash at any time. All gold investments have the same tax concern. Gold, being a commodity, is taxed as ordinary income even if  profit comes from buying a gold ETF. Between the costs of storage, premiums paid and taxes, returns from an investment in physical gold can be eroded quickly unless compensated by the gold price.

Gold price can be very volatile. Over the past three years, gold has seen an increase of 84% in value but has seen gains and losses of over 12% within the same quarter.

Indian households are estimated to hold over 16,000 tons of gold primarily as jewellery.

The BBC reports:

The price of gold hit a record high on Tuesday, with analysts giving a number of reasons for its rise. Both the price of the actual metal and the price for buying it at a future date rose more than 2% to $1,274.75 an ounce. It was the biggest one-day gain for the commodity in four months.

One of the factors spurring investors is gold’s traditional role as a so-called “safe-haven” investment at times of economic uncertainty. On the physical market, demand for both bullion and jewellery has risen ahead of the seasonal Indian wedding period and the Hindu religious festivals that begin in September.

Another driver is more technical – gold is priced in dollars, and any fall in the dollar makes it cheaper to buyers using other currencies. The dollar has fallen across a range of currencies, driven down by a range of factors. Its most remarked upon slide has been against the Japanese yen. It is trading at a 15-year low against that currency. The price of gold has risen 16% so far this year. The World Gold Council’s last report on the gold market predicted that continuing strong demand from jewellery buyers in the two fast-developing markets of India and China, would help keep the price high.

10 year gold price per ounce

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