Monthly Archives: January 2014

The HBCU Money™ Weekly Market Watch

Our Money Matters /\ January 17, 2014

A weekly snapshot of African American owned public companies and HBCU Money™ tracked African stock exchanges.

NAME TICKER PRICE (GAIN/LOSS %)

African American Publicly Traded Companies

Citizens Bancshares Georgia (CZBS) $6.16 (0.0o% UNCH)

M&F Bancorp (MFBP) $3.50 (0.00% UNCH)

Radio One (ROIA) $4.97 (1.84% UP)

African Stock Exchanges

Bourse Regionale des Valeurs Mobilieres (BRVM)  237.86 (0.71% UP)

Botswana Stock Exchange (BSE)  9 175.00 (0.07% UP)

Ghana Stock Exchange (GSE)  2 186.94 (1.95% UP)*

Nairobi Stock Exchange (NSE)  140.28 (N/A)

Johannesburg Stock Exchange (JSE) 46 675.88 (0.00% UNCH)

International Stock Exchanges

New York Stock Exchange (NYSE) 10 343.46 (0.32% DN)

London Stock Exchange (LSE)  3 655.91 (0.15% UP)

Tokyo Stock Exchange (TOPIX)  1 297.39 (0.23% UP)

Commodities

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Currencies Of The African Diaspora – Cameroon

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Because of its modest oil resources and favorable agricultural conditions, Cameroon has one of the best-endowed primary commodity economies in sub-Saharan Africa. Still, it faces many of the serious problems confronting other underdeveloped countries, such as stagnant per capita income, a relatively inequitable distribution of income, a top-heavy civil service, endemic corruption, and a generally unfavorable climate for business enterprise. Since 1990, the government has embarked on various IMF and World Bank programs designed to spur business investment, increase efficiency in agriculture, improve trade, and recapitalize the nation’s banks. The IMF is pressing for more reforms, including increased budget transparency, privatization, and poverty reduction programs. Subsidies for electricity, food, and fuel have strained the budget. Cameroon recently began several large infrastructure projects, including a deep sea port in Kribi, a natural gas powered electricity generating plant, and several hydroelectric dams. Cameroon must attract more investment to improve its inadequate infrastructure, but its business environment is a deterrent to foreign investment.

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Report Shows African American Businesses Only Earn 0.4 Percent of All American Business Sales

In all negotiations of difficulty, a man may not look to sow and reap at once; but must prepare business, and so ripen it by degrees. – Francis Bacon

Honestly, when I first looked at the census report I had to go over the calculations at least five times. This was primarily just because of the sheer disbelief that a population that is almost 15 percent of the American population and has 7 percent of America’s businesses does not even generate half of 1 percent of the $30 trillion in sales that all American businesses generate. Given the abhorrent figures I see on African America institutions daily, even I was remiss at just how shocked I was.

If this was a fight, then one would have to wonder just when our “trainer” would throw in the towel and stop the fight. Of the four recorded Diasporas shown, African Americans are not just in last place, they have been lapped at least once by every other group in terms of total sales divided by total firms. A strong sign of capital making its way into communities (or indirectly out of it).

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Total Sales Divided Total Firms = Average Sales Per Firm

  • European Americans ASPF – $453 000
  • Asian Americans ASPF – $327 000
  • Native Americans ASPF – $145 000
  • African Americans ASPF – $71 000

European American firms have over six times the ASPF, Asian Americans firms have almost five times the ASPF, and yes even Native Americans firms have over double the ASPF that African American firms have. This is probably a good place to insert a number of expletives at the dismay any economic strategist would feel about reviewing this kind of report. However, one must ponder exactly why are we here and how do we manage going forward with this information.

First, one of the startling statistics within the graph aforementioned is number of firms with paid employees. Entrepreneurs and companies do not tend to hire until they have reached a threshold that the business is producing enough revenue to bring in additional workers. A company brings in workers if it believes that by doing so it will help the company grow by increasing either efficiency or productivity. If Company A hires a worker for $30 000 a year, then Company A believes that worker can generate at least $30 001 in efficiency or productivity to the revenue of the company’s bottom line. Remember, companies are in it for profit, not charity. A worker producing less in revenue than is being paid is on their way to ensure the company is probably heading out of business. Labor still constitutes the majority of a firm’s cost regardless of industry. Therefore, the percentage of companies with with paid employees is a healthy indicator of a community’s economic strength and growth prospects. On an indirectly related note, this also plays a large role in explaining African American unemployment rates maintaining double digits. No surprise that Asian Americans are above the national average and have the nation’s lowest unemployment rate. Prior to the recession, they also had a higher median net worth than European Americans.

  • National Average of American Firms With Paid Employees – 21.1%
  • Asian American Firms With Paid Employees – 25.6%
  • European American Firms With Paid Employees – 20.5%
  • Native American Firms With Paid Employees – 10%
  • African American Firms With Paid Employees – 5.5%

Secondly, it helps to examine the concentration of where our businesses are in terms of industry. The graph below shows that of our firms with paid employees that almost one-fourth are in the health care/social assistance sector.

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Given the boom that is occurring in healthcare, one would assume we would be fairing much better with such a large concentration in that area. However, within that that number we tend to be concentrated in the home health aides business. In comparison, medical and health services within the same sector produces 400 percent higher revenues. A sign that even among our businesses we tend to be at the lower end of the value chain or at the very end of it.

Lack of access to funding and business training tends to be primary issues of why our businesses lack the ability to growth and tend to be in sectors that have minimum start up cost associated with them. This to some degree explains why there are no African American owned airlines, car companies, major integrated energy, and other capital intensive businesses. Business sectors that produce products which have immense sales volumes, we have essentially locked ourselves out of much to our own doing. African American financial institutions like credit unions and bank contain less than one percent of African America’s buying power. This severely limits the lending ability to African American business growth and thereby limits our ability to enter into more lucrative industries.

Sales are more important than buying power to a community. The revenues generated from sales allow for hiring which drops unemployment and raises buying power, wealth creation which can be reinvested into schools and other community services, and ultimately help create self-sufficiency for our communities. Our business portfolio must ultimately diversify into deeper parts of the value chain in all industries, but ultimately in order to do so it must start with strengthening our financial industry to allow for capital to grease our entrepreneurial engine.

African America’s December Unemployment Report – 11.9%

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Overall Unemployment: 6.7% (7.0%)

African America Unemployment: 11.9% (12.4%)

Latino America Unemployment: 8.3% (8.7%)

European America Unemployment: 5.9% (6.2%)

Asian America Unemployment: 4.1% (5.3%)

Previous month in parentheses.

Analysis: Overall unemployment sees another 30 basis point drop. All groups saw drops in their unemployment rates. Asian America saw the most significant decline with a 120 basis point drop. Despite a 60 basis point drop, the African American unemployment rate remains the only one in double digits.

African American Male Unemployment: 11.5% (12.1%)

African American Female Unemployment: 10.4% (11.1%)

African American Teenage Unemployment: 35.5% (35.7%)

African American Male Participation: 65.6% (66.3%)

African American Female Participation: 61.2% (61.4%)

African American Teenage Participation: 27.4% (26.5%)

Previous month in parentheses.

Analysis: All three groups saw drops in their unemployment rates, but only the teenage group saw its participation rates rise.

Conclusion: The overall economy added 74 000 jobs last month. This was the lowest overall figure in the past three years raising concerns about the Federal Reserve’s continued quantitative easing policy. African America’s labor force dropped by 81 000 largely explaining the significant drop in the unemployment rate. The number of employed increased for African America by only 17 000. Despite how bad it looks, the number of employed actually is the second highest number in the past five months. This is somewhat unsettling given the amount of season hires potentially baked into the statistics. As employers start to unwind these temporary hires over the next few months a clearer picture of African America’s employment situation should come to bear.

HBCU Money™ Business Book Feature – Risk Budgeting: A New Approach to Investing

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This is a practical and authoritative introduction to the concept of risk unit allocation as an alternative and more effective decision-making process for long-term investors. It sets out to help investors make an informed decision about how to implement and execute a “risk unit allocation” investment policy, and analyzes techniques to assess how risk might impact long-term investment returns. The book also introduces methods to allocate assets based on the “risk unit” exposures – in individual asset classes and on a portfolio basis, to meet long-term pension obligations and investment return objectives. There are contributions from leading experts drawn from consultancies; large institutional investors; pension plans; investment banks and academia.