News Analysis for the Investor on Feb. 3, 2012

China to become involved in European Debt Crisis

In a joint press conference with German Chancellor Angela Merkel in Beijing, Chinese premier Wen Jiabo indicated that China is investigating how it can become more involved in solving the European debt crisis.  According to the Financial Times, the European Financial Stability Fund or a co-fund would be the most likely way for China to invest in Europe.  China indicates, however, that it still is awaiting the sovereign nations to address their debt issues as well as further assurance that the euro-zone would work together.  A delayed European-China summit is to be held in two weeks.  Investors and markets globally should take this as a positive sign with the hope that the volatility will begin to ease.  Markets reacted positively to the announcement on Thursday.  The Dow was relatively flat closing down 11 points at 12,705.  Asian and European markets are mostly up on Friday.

Zuckerberg to maintain control of Facebook after IPO

CEO Mark Zuckerberg will own 56.9 percent of the shares once Facebook launches its IPO and goes public, according to Reuters.  The company is expected to be valued at up to $100 billion when it goes public. In its filing, Facebook says it is seeking to raise $5 billion but analysts estimate is will bring in $10 billion. It currently has 845 million users.  Zuckerberg has agreed to cut his compensation from $1.43 million last year to $1 on January 1, 2013.  Experts indicate that Zuckerberg’s tight control will cause the shares to sell for slightly less than if he was retaining a smaller percentage of shares.

Corporate Tax Rate is lowest in decades

Corporate tax rates as a share of profits are at their lowest levels in 40 years, according to the Wall Street Journal.  Total corporate federal taxes paid fell to 12.1 percent of profits earned from activities within the U.S., the lowest percentage since 1972.  The reason is that profits were lower during the recession and corporations were given a tax break known as “bonus depreciation”.  This allowed companies to write off investments in goods like industrial equipment, machinery and computers in order to encourage companies to spend money during the recession.  In 2012 that break is reduced by 50 percent.  Many are lobbying to extend this break with the belief that it will spur the economy.  The US has one of the highest corporate tax rates in the world at 39.2 percent but most companies pay much less due to many tax breaks.  The US faces a tax dilemma with the need for both increased revenues to pay down the deficit but a similar need to spur growth in the economy.

Minimum wage rates may climb this year

USA Today reports that 17 states either recently increased their minimum wage or are thinking of doing so in 2012.  President Obama has backed an increase in the federal minimum wage to $9.50 with automatic increases indexed to inflation.  Even Presidential hopeful, Mitt Romney, has backed an increase in the federal minimum wage.  The federal minimum wage applies unless a state has approved a higher minimum wage.  About 1.8 million workers (of the total 73 million hourly workers) earned the federal minimum wage, currently $7.25 per hour, in 2010.  Businesses oppose increases in the minimum wage because they are forced to reduce expenses and cut hiring.

Super Bowl marketers offering mobile experiences

A survey by Velti, a mobile marketing firm, indicates that 60 percent of viewers of the Super Bown will be using their mobile phones some time during the game on Sunday.  As reported by USA Today, advertisers are looking for ways to take advantage of these individuals.  Verizon and the NFL will be live streaming the game, which apparently could be very expensive for those who choose to take advantage of this option.  Others will be seeking watchers who will tag their ad which will take individuals to other ads.  Go Daddy will use a QR code that will take viewers to a racier version of commercials. Watch for TV ads seeking viewers to click on their phones to see…….even more ads.