It was reported this week that after nine decades of operating in Australia, Ford will shut down production in the country due to the strength of the Australia dollar and high costs, particularly wages. Ford reported that production costs in Australia "are twice that of Europe and nearly four times higher than in Asia." The factories are planned to close within 3 years.
Strength of the Australian dollar would make it more costly to operate there. How exactly has the Australian dollar fared against other major currencies? The AUD-USD is currently around 0.97. This is actually on the lower end of the 52-week range, and further down from the peak of around 1.10 reached in mid-2011. However looking at the 5 year chart, AUD-USD was as low as 0.6 in late 2008. Since the start of 2011, it has been steadily strong at above 1. Looking at AUD-JPY, again a similar strengthening trend can be observed. After hovering around 80 for most of mid-2009 to mid-2012, it has surpassed 100 this year and currently is around 97.78. Finally, looking at AUD-EUR, the pattern can be seen as it has strengthened from around 0.5 in late 2008 to currently around 0.75, although it was as high as 0.85 in mid-2012.
Sources:
Friday, May 24, 2013
Thursday, May 23, 2013
Mixed Headlines Regarding Housing Market
There were mixed headlines regarding the house market today. Sales of new homes in the United States climbed to an annualized rate of 454,000 in April. This was the second highest monthly figure since July 2008. Year-over-year, the median selling price increased 14.9% to $271,600, which is the highest on record. Partially fueling the rising demand are the low interest rates. This week the average 30-year fixed mortgage rate was 3.59%.
Despite these news, limitation on home supply is put by the lack of equity to sell homes. In a report released by Zillow (NASDAQ: Z), a real estate information provider with a "database of more than 110 million U.S. homes," keeping the property listing tight are the "about 22 million Americans ... [who] lack enough home equity to move." The report stated that 44% of homeowners with mortgages had less than 20% equity in their home, and 20% is usually required to purchase a new home. This figure includes 13 million Americans, or a quarter of homeowners with mortgages, who were underwater, or owed more than what their homes are worth. Zillow projects that by Q1-2014, only about 1.4 million homeowners will regain positive equity.
Sources:
Despite these news, limitation on home supply is put by the lack of equity to sell homes. In a report released by Zillow (NASDAQ: Z), a real estate information provider with a "database of more than 110 million U.S. homes," keeping the property listing tight are the "about 22 million Americans ... [who] lack enough home equity to move." The report stated that 44% of homeowners with mortgages had less than 20% equity in their home, and 20% is usually required to purchase a new home. This figure includes 13 million Americans, or a quarter of homeowners with mortgages, who were underwater, or owed more than what their homes are worth. Zillow projects that by Q1-2014, only about 1.4 million homeowners will regain positive equity.
Sources:
Tuesday, May 21, 2013
A Look into Venture Capital Firms Behind Tumblr
Yahoo's acquisition of Tumblr was a boon for many, including Union Square Ventures and Spark Capital, the two venture capital firms who made initial investments into Tumblr during its infancy. The combined investments of $10 million translated to 47% ownership of the company, giving them a 50-fold return in the recent deal with Yahoo that valued Tumblr at $1.1 billion. The deal was also a spark for the New York start-up community, as Tumblr represents the "largest venture-backed purchase for a New York company."
Union Square Ventures, based in New York, describes itself on its website as a "small collegial partnership that manages $450,000,000 across three funds" and invests in companies that "create services that have the potential to fundamentally transform important markets." Spark Capital, based in Boston, manages about $1.5 billion. Common across both funds include Twitter.
On Tuesday, the front page of Union Square Ventures highlights the Tumblr acquisition, which characterizes Tumblr as "world's greatest platforms for self expression." Tumblr has 108 million blogs across its network, and generates about $13 million in revenue annually, which is the amount Yahoo generates daily. Nevertheless, it is the younger audience and mobile users whom Yahoo seeks to attract through this acquisition.
Sources:
Union Square Ventures, based in New York, describes itself on its website as a "small collegial partnership that manages $450,000,000 across three funds" and invests in companies that "create services that have the potential to fundamentally transform important markets." Spark Capital, based in Boston, manages about $1.5 billion. Common across both funds include Twitter.
On Tuesday, the front page of Union Square Ventures highlights the Tumblr acquisition, which characterizes Tumblr as "world's greatest platforms for self expression." Tumblr has 108 million blogs across its network, and generates about $13 million in revenue annually, which is the amount Yahoo generates daily. Nevertheless, it is the younger audience and mobile users whom Yahoo seeks to attract through this acquisition.
Sources:
Saturday, May 11, 2013
Column Generation Illustration
This example illustrates the first few steps of using column generation method to solve an integer program. In particular, this is a cutting beam example, where given beams of length L = 100, determine the minimum number of beams to satisfy demand of size n_i for length d_i: n1 = 21, d1 = 13, n2 = 39, d2 = 31, n3 = 61, d3 = 36, n4 = 14, d4 = 45
The initial objective function is to minimize x1 + x2 + x3 + x4, given the following constraints:
Objective value is 135. This is the dummy case where no cutting takes place. The dual solution is (1, 1, 1, 1), so the next LP to solve is: max p1 + p2 + p3 + p4 subject to 13*p1 + 31*p2 + 36*p3 + 45*p4 <= 100. The solution is (7, 0, 0, 0), and since the objective value of 7 is greater than 1, continue. Add this column in the next run. The pattern generated here (7, 0, 0, 0) means that 7 pieces of length 13 will be cut from the stock, whose length is 100.
Now with the addition of a new variable, minimize x1 + x2 + x3 + x4 + x5, given the following constraints:
The objective value has decreased to 117, and the dual solution is (1/7, 1, 1, 1), so the next LP to solve is: max 1/7*p1 + p2 + p3 + p4 subject to 13*p1 + 31*p2 + 36*p3 + 45*p4 <= 100. The constraint is the same as the earlier maximization problem. The solution is (0, 3, 0, 0), so this would be the next column to generate, given that the the objective value of 3 is still greater than 1. Continue this process.
The initial objective function is to minimize x1 + x2 + x3 + x4, given the following constraints:
| 1 | 0 | 0 | 0 | >= | 21 |
| 0 | 1 | 0 | 0 | >= | 39 |
| 0 | 0 | 1 | 0 | >= | 61 |
| 0 | 0 | 0 | 1 | >= | 14 |
Objective value is 135. This is the dummy case where no cutting takes place. The dual solution is (1, 1, 1, 1), so the next LP to solve is: max p1 + p2 + p3 + p4 subject to 13*p1 + 31*p2 + 36*p3 + 45*p4 <= 100. The solution is (7, 0, 0, 0), and since the objective value of 7 is greater than 1, continue. Add this column in the next run. The pattern generated here (7, 0, 0, 0) means that 7 pieces of length 13 will be cut from the stock, whose length is 100.
Now with the addition of a new variable, minimize x1 + x2 + x3 + x4 + x5, given the following constraints:
| 1 | 0 | 0 | 0 | 7 | >= | 21 |
| 0 | 1 | 0 | 0 | 0 | >= | 39 |
| 0 | 0 | 1 | 0 | 0 | >= | 61 |
| 0 | 0 | 0 | 1 | 0 | >= | 14 |
The objective value has decreased to 117, and the dual solution is (1/7, 1, 1, 1), so the next LP to solve is: max 1/7*p1 + p2 + p3 + p4 subject to 13*p1 + 31*p2 + 36*p3 + 45*p4 <= 100. The constraint is the same as the earlier maximization problem. The solution is (0, 3, 0, 0), so this would be the next column to generate, given that the the objective value of 3 is still greater than 1. Continue this process.
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