Map to venturing out into business

Mark Bouris, Sunday Telegraph- Money, 27/3/2011
Obtained from Ms Owen

This newspaper article is a beginners guide when they are entering the Australian business market and it shows the steps one has to take- obtaining legal advice, the set-up of the business, and looking at your own personality so that your business can suit it, and the other way around.

This article relates to the topics discussed in Commerce as currently we are looking at 'Being an Entrepreneur'. This article shows the steps required to further that, by starting a business and noting what other steps are to be taken- expert advice, the decision making whether to have a high-growth start-up, buying an existing business or becoming a franchisee owner, which are all entrepreneurial but at different levels, and some with more risk.

Being an entrepreneur means that there must be a desire to make it succeed, and also actions to back that up. This theme is not only explored in this article, but also in the example of Jesse Hancock in the textbook (p 313) as he built his company NueVue Graphics from the ground up. He says to not underestimate the power of passion- 'If you are passionate about what you do and where you want to go, then you will get there.'

Aussie Dollar expected to stay strong for months

SMH.com.au

Oct. 26 2010

http://www.smh.com.au/business/markets/aussie-dollar-expected-to-stay-strong-for-months-20101026-1715s.html

This article, published back in October of 2010, indicates that the Australian Dollar will be above 90 US cents throughout 2011 as the Reserve Bank of Australia continues to raise interest rates in the aftermath of the Global Financial Crisis.

During this period in October 2010 the Australian dollar had reached parity with a high of 100.04 US cents, and that has been driven because the US Federal Reserve will print money to stimulate the economy has depreciated the US dollar against the Australian dollar and lifted commodities.

The Reserve Bank of Australia received a report that stated that Australia's economy is unlike the United States, it 'dances to a different drum' and continuing good economic news is likely for the RBA to lift interest rates again.

Since then the Australian dollar has jumped above parity and only going below that in March after the Japanese earthquake and tsunami, but since recovering over that again.

In Commerce we have found that the Australian Dollar can appreciate and depreciate against different currencies. At the moment as the Australian dollar is recovering from the Global Financial Crisis is it appreciating against the US Dollar, which has begun to print money- which can lead to hyperinflation, as we have learnt that in Commerce as well with cases in the past such as Germany, Zimbabwe and Argentina.

Dollar rises against yen as calm returns to markets

Newspaper- SMH.com.au

March 22 2011

http://www.smh.com.au/business/dollar-rises-against-yen-as-calm-returns-to-markets-20110321-1c3qi.html

The consistency of the Australian dollar against the Japanese Yen means that the global financial market was stabilising after the Japanese earthquake 10 days earlier and the Libyan conflict. The Australian dollar was trading at ¥81.39 yesterday (Monday 21st March), up from ¥77.33 on Thursday.

Global investors have been buying the English Sterling and European Euro on the expectation that the Bank of England (England's equivalent to the RBA) and the European Central Bank would raise rates. This means that investors have been staying away from the US Greenback, due to speculation that the US Federal Reserve would be the last out of all major currencies to rise, which has helped the Australian dollar in the past as it has stayed near parity to the US dollar throughout the last few months.

The VIX Index in America traded above 30 last week when it usually averages about 15-20, another sign that world markets are beginning to strengthen, which means that the Australian dollar will again gain ground of the US dollar- having reached parity today for the first time in a week.

In Commerce we have learnt about how foreign exchange rates affect the Australian dollar, and how other currencies can appreciate and depreciate against the Australian dollar. In recent times the Australian dollar has depreciated against the US Dollar due to global instability but today it has appreciated back to parity. The Australian dollar also has appreciated against the Yen, trading at 1 AUD= 81.39 YEN.

Oil drops, yen gains in wake of Japan's disaster

March 12, 2011, SMH.com.au

http://www.smh.com.au/business/markets/oil-drops-yen-gains-in-wake-of-japans-disaster-20110312-1brsn.html

World oil prices and the economy in the world in general has shaken in the aftermath of the Japanese Earthquake. Australian stocks lost 4.5% in one week, signalling the end of its worst week since May last year. Meanwhile the Japanese Nikkei dropped 1.7% as the Japanese Government pledged financial stability after this earthquake.

Around the world the price of oil has continued to rise hitting US $100 a barrel, and Japanese oil exporters JX Nippon have closed due to the earthquake and resulting tsunami, and their three plants produce 600 000 barrels of oil a day, providing even more pressure on the market that has had trouble in the Middle East currently.

Meanwhile the S&P 500, Bloomberg Europe 500, MSCI Asia Pacific Index have all fallen due to the earthquake.

In Commerce we have discovered that the economy is influenced by overseas pressures that have introduced recessions over the years that had not been begun on Australian shores. In this case oil is one pressure that is driving up prices in Australia and around the world, and combined with the earthquake in Japan it would mean that prices would continue to rise.

Trade boom survives flood shock 3/3/2011, Blog Post 2

3/3/2011

SMH.com.au

http://www.smh.com.au/business/trade-boom-survives-flood-shock-20110303-1bfk3.html

The commodities boom is what is driving the Reserve Bank of Australia to drive up its interest rates (or cash rate as described here). The trade surplus in the past 10 months has reached over $1 billion Australian Dollars and last month's $1.88 billion surplus has exceeded expectations due to flooding and cyclones in Queensland, which in the end was offset by coal exports. The reason why the RBA is holding interest rates despite this data is the fact that Australians are spending less and saving more, even though household incomes jumped by 8.7% last year (in which Australians chose to save).

This shows that the economy is influenced a lot through imports and exports, and that patterns in spending and saving by Australians influences the interest rate. Also the natural disasters in Queensland have lessened the value of exports as coal lost 39 and 32% of their value in the past month. Imports have also dropped in January as there was a 29% drop in fuel imports.

However Australian commodity prices are set to increase as exports earnings are forecast to rise 29% in the year to June 2011, and miners are taking that opportunity to increase their spending so that in the financial year of 2011-12 their spending should reach $76 billion. Because of this spending by the mining sector it should increase exports, wage and tax receipts, and helping the country recover from the GFC.

The Business Cycle: Part Two P285

Activities

1: The Reserve Bank of Australia lowers interest rates during a conraction because it should raise people's confidence in the economy.

2: One of the main causes of a recession/depression is the lack of consumer spending, and not the inability of the economy to produce goods and services.

3: A depression is a prolonged time of recession ie: economic downturn.

4: Money not spent on products mean that businesses cut back on production. This in turn cuts incomes within the business and ultimately jobs. If the business shuts down because of the loss of employees and money through the lack of buying products consumer confidence is shaken more, especially if the company is a bank and millions of dollars are waged on the bank's survival.

5: a) Inflation is at a very low level which means low economic growth.
b) Inflation is at a very high level which means a lot of economic growth, plenty of spending, and high interest rates.

6: The government's main role in the economy is to regulate the mature and level of economic activity for the nation as a whole.

7: a) up, down, down, down, down, down, down.
b) down, up, up, up, up, up, up.

8) A rise in consumer confidence often means that people are more willing to buy. This, with increased demand, means that manufacturers make more produce and therefore spend more, injecting money into the economy which results in a boom.



9) a) Expansion

b) During the 1950's and 60's the economy was mainly steady, with spikes in 1950 and 53, but overall during that period the economy was in a slow expansion.

Unrest in the Middle East

Gulf Shares Drop In Middle East Unrest, SMH.com.au, 21/2/2011

Gulf shares drop on Mideast unrest

February 21, 2011 - 7:14AM

Stocks markets across the Gulf Arab states fell on Sunday, with Dubai's largest exchange registering the steepest drop as unrest in the Mideast lapped at the shores of oil kingpin Saudi Arabia.

The Dubai Financial Market closed down 3.66 per cent, to 1536 points, with developer Emaar Properties' shares sliding 4.73 per cent. The company was the force behind the Burj Khalifa, the world's tallest building. In Kuwait, the benchmark index closed down 2.52 per cent, to 6394, bringing its year-to-date losses to more than 8 per cent.

The drops in the oil-rich Gulf region's exchanges are largely linked to the unrest in Bahrain, where massive protests have roiled the island nation for more than a week as the Shi'ite majority presses the Sunni monarchy for greater rights and freedoms. Meanwhile, a bloody crackdown on protesters in Libya has further rattled markets as the unrest spilled over to the first major oil producer in the Middle East.

The uprisings in Libya and Bahrain "mark a new turn in the crisis," said brokerage house Nomura in a research note received on Sunday.

"Regional hydrocarbon producers are now being threatened, and sectarian divisions (notably in Bahrain) are increasing the risk of cross-border involvement in what have largely been domestic revolutions thus far."

Sunday is the start of the work week in the Arab world, except for Saudi Arabia, and the market selloffs reflected investors' first chance to weigh in on the developments over the weekend.

The protests in Bahrain marked the first time the unrest sweeping across the Arab world has seriously challenged the entrenched regime in one of the wealthy Gulf Cooperation Council nations.

Also aflame is Yemen, the Arab world's most impoverished nation, which sits on the south-western tip of the Arabian Peninsula.

The unrest on Saudi Arabia's doorstep has sparked fears of a spillover into the country, with concerns focusing both on the Sunni-Shi'ite divide in Bahrain and the fact that a significant change in Bahrain's political system could spark calls for similar reforms in Riyadh, which sits atop the world's largest proven reserves of conventional crude oil.

Saudi Arabia has a Shi'ite minority primarily located in its eastern province, where the bulk of its oil is located.

Any hint that stability is in question in the kingdom - the de facto leader of the 12-nation Organisation of the Petroleum Exporting Countries - could send oil prices surging across the world, threatening a continued global economic recovery.

"It's a general risk aversion in the region as a whole," said John Sfakianakis, chief economist with the Saudi Arabia-based Banque Saudi Fransi, explaining the drops in the region's markets.

With Egypt's market still shuttered after the unrest that toppled Hosni Mubarak, and the protests jumping from one Arab nation to the next, investors "are basically trying to hedge themselves against downside risks", Sfakianakis said. "And the downside risks are accumulating."

Saudi Arabia's TASI index closed down 0.78 per cent to 6333 points, building on a 1.6 per cent slip on Saturday, the start of the work week in the country.

In Kuwait, shares of telecommunication giant Zain fell 7.25 per cent to 1.28 Kuwaiti dinars.

The slide came a day after the investment company headed by Saudi billionaire Prince Alwaleed bin Talal withdrew its offer to buy a 25 per cent stake in the Kuwaiti telecom operator's division in the kingdom.

Kingdom Holding said in a statement on Sunday it believed the nonbinding offer it had submitted was "a reasonable offer to the shareholders of KHC and Zain Kuwait."

Qatar's exchange was down 1.6 per cent, to 8563 points, while Abu Dhabi's exchange was off 1.91 per cent to 2632 points.

AP

http://www.smh.com.au/business/markets/gulf-shares-drop-on-mideast-unrest-20110221-1b1bb.html

I have chosen this article because we are learning that in the world economy what happens in one country or region affects the entire world, notable the Global Financial Crisis in 2009 and the Great Depression in the 1930's. These however are extreme cases, but the Middle Eastern unrest (notably in Bahrain, Libya following up on Egypt's unrest) have made the share market in the affected countries and also in Dubai and Kuwait have dropped 3.66% and 2.52% respectively. Dubai's stock market slide was mainly due to Emaar Properties stock sliding down 4.73%.

The reason for the economic downturn in Libya and Bahrain (therefore affecting Dubai and the rest of the world) is that hydrocarbon producers are being threatened and that cross-border involvement is being increased. Yemen, the poorest nation on the Arabian Peninsula, is being affected as well.

Bahrain's conflict is being monitored closely by Saudi Arabia, as the Muslim Sunni-Shi'ite divide changed Bahrain's political system. This may spark a change in Saudi Arabia's policy as well, which just so happens to have a Shi-ite community on top of the bulk of Saudi Arabia's oil field. If stability is threatened there it would spark already oil prices to rise around the world, therefore threatening the recovery of the GFC.

Egypt has sparked all of this unrest, that has continued over to Libya, Bahrain and Yemen, but the economic impacts of the overall problem is that it could affect the rest of the world