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Investing

What’s Important in the Financial World (7/11/2012)

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By Douglas A. McIntyre Published
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Spain has decided the only way to tackle its budget deficit is via extremely sharp expense cuts coupled with a more modest move to increase taxes. Prime Minister Mariano Rajoy says his government will reduce spending by 65 billion euros over two years. That is an extraordinary number, given the size of the nation’s economy and the need for social services to support the 25% of the working age population that is unemployed. Rajoy also will ask parliament to increase the nation’s VAT from 18% to 21%. That will put a tremendous strain on consumer, and later business, spending. It will drive the people in Spain who can afford to consume and lift the economy to reconsider what they buy and pay.

JCPenney Forecast

JCPenny’s (NYSE: JCP) problems get worse and worse. The retailer said it would cut 350 people at its headquarters, which barely scratches the surface of its cost problems, nor altars a trend that caused its sales to drop 20% in the most recently reported quarter. Credit Suisse issued a report that forecasts another sharp drop in the current quarter. According to MarketWatch, Credit Suisse analyst Michael Exstein “doubled his adjusted second-quarter loss estimate on Penney to 38 cents a share from his original loss estimate of 19 cents a share. For the year, his estimate excluding charges fell to profit of $1.07 a share from $1.16.” Presumably, JCPenney customers have taken their business to other retailers — most likely Macy’s (NYSE: M) and Sears (NASDAQ: SHLD), which offer similar merchandise.

An Amazon Smartphone

There are more rumors — or news, based on the credibility of the reports — that Amazon.com (NASDAQ: AMZN) has signed up suppliers in Asia to build a smartphone. The device would compete with the Apple (NASDAQ: AAPL) iPhone and an army of Google (NASDAQ: GOOG) Android-powered devices, led by the new Galaxy S III from Samsung. Ongoing speculation is that Google and Microsoft (NASDAQ: MSFT) eventually will launch their own smartphones too. Amazon has the leverage of its presence in the tablet PC market because of its Kindle Fire. It also has one of the world’s best marketing platforms, due to the tremendous traffic to its site. But, given the crowded market, none of those advantages may be sufficient.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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