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Composite graphic form business Martin Frost's Business News digest
Saturday 12th July 2011
China's inflation jumps to 3-year high  | Right at the death, there goes the inheritance  |   Labouring in vain as essential skills in short supply  |   Beware the typical pitfalls of wrestling with a boar market  |   Six months for banks to raise capital if they fail stress tests  |   Diamond prices surge in step with China and India  |   SSE to axe doorstep force after mis-selling scandal  |   Outlook cloudy for Japan's world-beating supercomputing program  |     JPMorgan set to replace Bank of America as biggest bank in US  |   Professor Zuckerberg's figures add up to economic collapse  |  Asset managers seeking extra fundsIndia Post to lose its monopoly  |   Why dotcom offices still party like it's 1999  |   Hello 'generation rent': goodbye social mobility  |   Investors hit by surprise Standard Life fee increases  |  M&S fortifies products with vitamin D to tackle rickets  |


China's inflation jumps to 3-year high
Economic Times - 9th July 2011

China's surging inflation accelerated to a three-year high in June even as the overheated economy began to cool.

Consumer prices rose 6.4 percent over a year ago, a sharp jump from May's 5.5 percent rate, data showed Saturday. It was driven by a 14.4 percent rise in politically volatile food costs, up from 11.7 percent in May. ``This far exceeds expectations,'' said IHS Global Insight analyst Alistair Thornton.

Communist leaders declared taming prices their priority this year and have been frustrated as inflation rose steadily, even as manufacturing and other activity eased in the face of repeated interest rate hikes and other controls.

Inflation is politically dangerous for the ruling communists because it erodes economic gains that underpin their claim to power and can fuel unrest. The Cabinet's planning agency had forecast that June inflation would likely exceed May's increase due to summer flooding that damaged crops and pushed up prices of pork and vegetables.

The price of pork, the country's staple meat, jumped 57.1 percent in June, the National Bureau of Statistics reported. That is especially sensitive in a society where poor families spend up to half their incomes on food.

The June figures were released earlier in the month than usual in what the bureau said is a new policy to prevent leaks by announcing data as soon as they are compiled.

A state newspaper said last month that several officials of the bureau and China's central bank were fired on suspicion of leaking data to stock brokerages, which might have profited from being able to anticipate changes in financial markets.

Analysts blame the inflation spike on the dual pressures of consumer demand that is outstripping food supplies and a bank lending boom they say Beijing allowed to run too long after it helped China ward off the 2008 global crisis.

Li Peilan, a 70-year-old Beijing housewife, said food costs consume nearly half her family's 6,000 yuan ($920) monthly income. ``Considering other costs such as buying other daily items and the education of my grandson, we are almost spending all of our income now,'' Li said as she shopped at a market in the Chinese capital.

Rapid growth in factory output and other activity have eased in recent months as the government tries to steer world's second-largest economy to a more manageable growth pace after last year's double-digit expansion.

Beijing has raised interest rates five times since October, most recently on Wednesday, but analysts say another rise or tighter limits on bank lending might be imposed if inflation stays high.

The rate hikes also increase the payout on bank deposits, which helps to put money in consumers' pockets. Still, the 3.5 percent deposit rate after the latest increase is well below inflation, meaning Chinese households lose money by keeping it in the bank.

China's economy expanded by a sizzling 9.6 percent in the first quarter of the year and even though growth is easing, it is expected to be close to 9 percent in the second quarter. The World Bank raised its forecast of China's economic growth in April from 8.5 percent to 9.3 percent and said Beijing should tighten monetary policy further.

Premier Wen Jiabao, the country's top economic official, expressed confidence last month that inflation was under control. But he later acknowledged it would overshoot the official 4 percent target for the year.

June's rise in the consumer price index was the fastest since 7.1 percent rate in June 2008. ``I don't think this means the wheels are falling off. But it means they underestimated what pumping all that money into the system over the past three years can do,'' Thornton said.

China's central bank governor said Friday that the bank's inflation fight is complicated by the fact that its official mission requires it to support growth and employment. ``It's difficult for China's central bank to only set one objective of controlling inflation,'' governor Zhou Xiaochuan said in a speech at Tsinghua University, the newspaper Beijing News reported.

Zhou said China ``can tolerate a certain degree of inflation'' in the course of rapid changes in its economic growth patterns, the newspaper said.

Analysts expect inflation to stay high through at least July but said it should decline in the second half of the year as the economy cools.

Manufacturing activity in June slipped to a 28-month low due to curbs on credit and weaker overseas demand, according to the China Federation of Logistics and Purchasing, an industry group. It said the downward trend was likely to continue. ``Growth will continue to slow,'' HSBC economist Qu Hongbin said this week. ``This is a necessary evil for China to fight inflation.''

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Right at the death, there goes the inheritance
Ian Verrender - The Age - 9th Huly 2011

It was meant to be the defining moment in James Murdoch's ascension to the throne.

At noon London time yesterday, Britain's Culture Minister, Jeremy Hunt, had been scheduled to give the tick of approval for News Corp's biggest acquisition - the $13 billion mop-up of Britain's pay television giant BSkyB.

After indicating last week that he would give the green light, with the requisite happy snaps of mogul and son, Hunt's decision was a foregone conclusion, a mere formality.

But it was not to be. Instead, the deal is in tatters, amid increasingly vocal calls for James Murdoch to resign as chairman of BSkyB and with Rupert Murdoch scrambling to contain the political firestorm engulfing the company. It is now unlikely the purchase will be approved before September, if at all.

Hunt's office was inundated with almost 100,000 last-minute submissions opposing the transaction, and the ministry is obliged to sift through all of them, which could take months.

Hunt cannot legally block the takeover, but the broadcasting regulator Ofcom has that power if it deems those running News International (the British part of the company) are not ''fit and proper persons'' under the 1990 Broadcasting Act.

Some analysts have dismissed that threat as remote. But Rupert Murdoch wasn't taking any chances. His decision, reached almost overnight, to shut the hugely popular scandal sheet the News of the World appears to have been based almost entirely on fears that the phone-tapping and bribery scandal could jeopardise his pay television ambitions and cripple the company's European operations.

Even if he manages to avoid the worst, this week's events have almost certainly seen Rupert Murdoch's grip on the media goliath slip. The 80-year-old patriarch has run the company with an iron fist for more than half a century and has been obsessed with handing control to one or several of his offspring, an attitude that has led to tension within the company's ranks and frustration among shareholders.

His eldest son, Lachlan, who was being groomed as the heir, stormed out of News Corp's New York office six years ago after a run-in with another senior manager. He has since repaired his relationship with his father and remains on the News board, but has forged an independent media career.

This year two American investors launched legal action against News after it bought Shine, a British television production company owned by Murdoch's daughter Elisabeth, for a whopping $635 million. That deal also brought Elisabeth into the News executive ranks and made her a contender to take the reins.

But until this week James Murdoch was clearly the anointed one. His arrival in Britain in 2003 to head BSkyB was greeted with howls of protest and accusations of nepotism. But he worked doggedly to overcome the prejudice, eventually succeeding his father as chairman in 2007.

For most of the past year, he has concentrated on mopping up the outstanding 60 per cent of the satellite television operation not owned by News. It has been a gruelling process and one that has won him the grudging admiration of most of the British business community.

All that has suddenly unravelled. Murdoch jnr's future is under a cloud and Rupert's succession plan is in disarray.

In Parliament, Tom Watson, a former Labour minister, accused James Murdoch of orchestrating a cover-up, authorising payments to silence victims of the phone hacking scandal and the attempted destruction of data in India. He called for him to be suspended immediately.

The former BBC chairman Christopher Bland called on Ofcom to block the takeover and deem News not fit and proper to hold a broadcast licence.

''These powers are rarely used; they should be used now,'' he wrote to the Financial Times. ''And James Murdoch should immediately resign as chairman.''

Political patronage and media power have long gone hand in glove. But Murdoch snr took the symbiotic relationship to new levels during the Thatcher era, a relationship that subsequent political leaders found they had little choice but to emulate, particularly given Murdoch's growing influence.

A central plank in that growth was his foray into pay TV. As an industry, it has been a slow burn. The early years were dogged by heavy start-up costs, slow take-up rates and heavy competition. The outfit was haemorrhaging.

That all changed in 1990 when Murdoch engineered the merger of his Sky Television with British Satellite Broadcasting and installed Sam Chisholm as chief executive. Ridding himself of the opposition was a masterstroke, politically and financially, and Murdoch continued to expand his cable television operations across Europe and the US.

In recent years, the British operation has performed spectacularly. Annual profits rose threefold last year, with pre-tax earnings of £878 million in 2009-10. There was another cracker result in the first half of 2010-11, a profit of £467 million on revenue of almost £5 billion.

Unlike his recent disastrous foray into social media, Murdoch considered mopping up the 60 per cent of BSkyB a sure bet. The company clearly is on a growth trajectory. And had James pulled the deal together, it would have cemented his credentials as a worthy successor.

There is still a chance the pair may rescue the deal and, with it, some credibility.

But with more charges certain to be laid against former News employees, it will take every bit of Murdoch snr's legendary negotiating skills to weave through the obstacles.

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Labouring in vain as essential skills in short supply
Ross Gittins - BusinessDay - 9th July 2011

The Australian workforce may be expanding at an impressive rate, but its growth might not mitigate an inevitable skills shortage.

Most of the interest in this week's figures for the labour force in June was in what they told us about the strength of the demand for labour. But what's happening to the supply of labour is just as interesting.

With trend figures showing total employment grew by 188,000 over the six months to December but by only 38,000 over the past six months, it's clear the demand for labour is slowing.

Even so, the rate of unemployment staying steady at a healthily low 4.9 per cent for the past four months suggests the demand for labour is keeping pace with the supply of it. This means the supply must have slowed, too.

The labour force (all those people with jobs or actively seeking them) grew by 1.7 per cent to just over 12 million people in the year to June, which was down from 2 per cent growth the previous financial year.

This is distinct from the earlier position because, as an article in the latest Reserve Bank Bulletin points out, the labour force has grown at an average rate of 2.5 per cent a year since 2005. That's fast - it's also an extra 1.4 million people. Where have they come from?

The first source is more people of working age (those 15 and over) choosing to participate in the labour force. The big increase has been among women, plus older workers choosing to delay their retirement.

Since 1980, the rate of participation by women aged 25 to 54 has increased by about 20 percentage points, while the rate for women aged 55 to 64 has risen by a remarkable 35 percentage points.

Female participation has been rising since the 1960s, reflecting changing social norms as well as economic factors. The proportion of women with post-school qualifications has risen from 7 per cent in the early 1980s to more than 25 per cent today, which is higher than the proportion for men. Why wouldn't these women want to use their qualifications in paid work?

The strong growth of employment in service industries has suited women, partly by providing more jobs with flexible working arrangements. Growing access to childcare and paid maternity leave has also helped.

But the largest increase in participation has been for older workers. The change for men began in about 2000. Since then, the rate for males aged 55 to 64 has risen by more than 10 percentage points.

There had been a trend towards early retirement, but this is reversing. One factor encouraging people to remain in the labour force for longer is greater longevity. Another is increases in the qualification age for the age pension. Since 1995, the age for women has been gradually increasing from 60 to 65.

Other factors encouraging later retirement include more flexible work practices and the rising share of jobs in the services sector, where employment is typically less physically demanding than in the traditional goods-producing industries.

But a bigger factor explaining the growth in the supply of labour has been the growth in the population of working age. It has been increasing at an average rate of 1.5 per cent a year since 1980. Annual population growth picked up markedly from the mid-2000s, peaking at more than 2 per cent in 2008, since when it has fallen back to the average.

Part of this is population growth is ''natural increase'' (more kids turning 15 than oldies dying) but most of it is net migration. The increase in net migration between 2004 and 2008 mainly reflected a higher intake of permanent and temporary skilled migrants and a huge rise in the number of overseas students.

The Howard government's switch of priority from family reunion to skilled migration helps explain why more than 80 per cent of the migrants who arrived in 2009-10 were of working age, compared to 70 per cent of the total population.

The proportion of the labour force that had arrived in Australia in the previous five years rose from under 3 per cent in 1996 to 6 per cent in 2011.

The significance of the government's annual permanent immigration program has been overshadowed by the temporary immigration categories for skilled workers (employer-sponsored 457 visas), students and working holidaymakers.

The number of 457 visa-holders has doubled since the mid-2000s, though their share of total employment is less than 1 per cent. Their numbers have fallen as a result of the global financial crisis, but are likely to go back up because of resources boom mark II.

The number of student visa holders in Australia has tripled over the past decade, accounting for most of the surge in net migration. Overseas students are permitted to work 20 hours a week while their course is in session and unlimited hours during scheduled course breaks. Student numbers have fallen sharply, however, because of a tightening in entry rules, the higher exchange rate and the bad publicity in India.

Those who disapprove of high immigration should remember this, as should those economists who bewail the slowdown in net migration. A lot more overseas students won't avert our looming skilled-labour shortages.

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Beware the typical pitfalls of wrestling with a boar market
Marcus Padley - Sydney Morning Herald - 9th July 2011

There are bull markets, there are bear markets and then there are boar markets. We're in a boar market. It's boaring. The market hasn't gone anywhere in more than five years and we've been in the same trading range for coming on two years.

From a broker's point of view, this is all part of the cycle. We're used to it. Life for us has always been feast or famine and those who have been around know that sometimes the market pays out and sometimes it doesn't and, when it doesn't, clients don't make money, the volumes dwindle and activity dies down. Perfectly normal.

So what do you do in a boar market? Here are some typical reactions, most of them mistakes:

Private investors Broker reactions
•   Average down, otherwise known as buying a falling market •   Declare every ''up'' day as the beginning of a new long-term bull market.
•   Shut your eyes and declare your faith in the long term. Set and forget. •   Continue to be optimistic. Being 100 per cent optimistic sells more product than being 99 per cent optimistic.
•   Convert to ''value'' investing without changing your time horizon from 20 minutes to 20 years. •   Produce more trading ideas and if they're ignored call them ''conviction'' ideas. Keep that commission rolling.
•   Turn from investor to trader and attempt cute short-term trading in unpredictable short-term share prices. •   Emphasise that the market always goes up, and say ''in the long term'' when you've put the phone down.
•   Trade even more to compensate for absent capital gains. •    Final resort - find a new job earning a salary instead of commission.
•   Start shorting stocks through leveraged derivatives on line.

•   Get your credit card out and buy an instant fix, like that $8000 course in option trading.

•   Declare you are ''no good'' at investing and exit the market forever.










More appropriate reactions on the other hand might include:

•   Trade the range. Without a trend that's all that's left.

•   Trade less. When I was working at Nomura in London in the 1980s and the market collapsed the head of the trading desk sent four principal traders on holiday for a month to stop them trading. He told them to go and play golf. They did. He saved the firm a fortune. There are times in the market when you are better off spending your money on beer and holidays because at least they deliver some value, more than a dollar lost anyway. Go to Bali for a month. It'll be cheaper than pushing water uphill.

•   Buy high-income stocks. A natural reaction in a bear market is to forego the concept of making capital gains and instead focus on defensive stocks and income stocks. For those who do not rely on the income, cash (term deposits) is the only defensive stock in a falling market. For those who think they can do better, a word of warning. Not all income stocks are quality or defensive. Many are high yielding because they are crap companies. It's called the yield trap. When it comes to yield more is often less. Look at how much debt they have and how they earn their money. Ask yourself, is it reliable in all conditions?

•   Beware a really big fall. Even the income investors, keep your eyes open and set some wide stop losses (10 per cent?) and stick to them. Only a few professionals will ever advise you to sell. The job of protecting your net worth from something major is yours.

•   Adjust expectations. Expectations met are the root of all happiness. If you want to be happy in a boar market you might just have to bite the bullet and shade your expectations a bit, and you'll need to clip those of your dependants as well.

•   Change your routine. The head of equities at one major broking firm was famous for once going to the cinema in the afternoon in a bear market. And why not? Apart from avoiding losses the main game in a boar market is to amuse yourself somewhere warm until things get better.

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Six months for banks to raise capital if they fail stress tests
Sean Farrell - Independent - 9th July 2011

European banks that fail stress tests will be given six months to raise new capital before governments step in to bail them out.

The results of tests on the financial strength of 91 banks will be revealed next Friday, the European Banking Authority (EBA) announced yesterday.

But in an about-turn on promises that taxpayers would never again be required to foot the bill for rescuing failing banks, Europe's finance ministers are set to approve measures to support those that come out of the tests weakly.

Banks that are close to failing the tests will be put on a critical list in case their positions worsen.

They will be given until the end of September to make plans for strengthening their balance sheets and another three months to put their plans into action.

A document setting out the proposals, reported by Reuters, has called for capital-boosting based on private-sector measures. These include retaining earnings, selling assets, merging and raising extra equity or other high-quality capital.

But governments will be required to intervene if the plans fail. Another option is "the extreme case" of "a process of orderly restructuring and resolution" if a bank's failure threatens financial stability.

The stress tests are meant to reassure the market that potential threats to banks' survival have been uncovered and those who pass have a clean bill of health.

The EBA claims they are stricter than tests carried out last year, which gave Ireland's banks the all-clear only weeks before the country's financial system nearly collapsed and the EU and International Monetary Fund were forced to intervene.

Nomura analysts argued yesterday that the tests were credible and that the results would boost shares of major European banks.

They predicted that failures would mainly be at small, untraded banks in countries such as Greece, Portugal and Germany.

"Investor concerns have been tainted by the periphery; the core is strong and it compares favourably with the US," they said. "With debt markets already improving, we believe that benign results could catalyse a rally for [bank shares]."

The plans for government support heap more pressure on cash-strapped peripheral eurozone countries such as Italy and Portugal because they may have to bail out banks while trying to put their finances in order.

Bond futures and UK gilts rose as investors rushed for safety, while the extra cost demanded for buying Italian debt over German bonds hit a new high for the euro era.

The stress tests have caused anger and friction between European states over how to treat different securities on their balance sheets. Banks have also attacked the EBA for shifting its requirements late in the process.

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Diamond prices surge in step with China and India
Thomas Biesheuvel - New Zealand Herald - 9th July 2011

Clive Cowdery, the Resolution founder who made about US$240 million ($290 million) buying and selling insurers, is betting on diamonds after prices rose five times faster than gold this year on demand from China and India.

Cowdery, 48, is among startup investors in Diamond Capital's US$20 million fund that will manage a portfolio of the polished gems valued up to US$400,000 apiece. Rajeev Misra, UBS's securities business joint head, is also backing the London-based project, Diamond Capital said.

"I'm conscious of the need to balance my investment risk," Cowdery said. "Something as non-correlated with financial-market movements as this fund was attractive."

Diamond prices jumped 26 per cent in the first six months as rough gem production failed to match surging demand from jewellery buyers in the swelling middle classes of China and India.

That compares with 5.6 per cent for gold, which reached a record US$1577.57 an ounce in May.

Investors disappointed at bullion's performance or the 4 per cent advance in the MSCI World Index of stocks in the first half may still prove hard to sell on diamond funds.

"I'm not a great supporter of them, but I can understand why high net-worths find them quite attractive," said Des Kilalea, an analyst at RBC Capital Markets.

"You rely really keenly on the guy who is doing the buying to know what he is doing."

The new fund's diamond trading will be headed by Rishi Khandelwal, who established a gem wholesaler and retailer in Dubai in 2006. He is part of a three-member board that will meet quarterly to set strategy, said Peter Langdon, investor- relations director for the fund.

Harry Winston Diamond Corp said in May it proposes a US$250 million diamond fund for institutional investors, while Fusion Alternatives plans one backed by polished stones this year.

Supplies of rough diamonds are forecast to remain flat in the next five years and will fail to match demand driven by China and India, according to RBC.

De Beers, the world's largest producer, said June 9 demand will surpass output for at least the next five years because of a lack of new mines.

Last year polished gems advanced 17 per cent, according to data compiled by polishedprices.com, while gold gained 30 per cent.

Prices advanced 2.2 per cent in the past week to the highest since at least 2002, said polishedprices.com data.

Diamond Circle Capital, the first publicly listed fund to invest in the stones, has plunged 54 per cent since selling shares in 2008.

The fund slumped as the financial crisis reduced investor appetite for its US$1 million-plus gems.

The first diamond investment trust, set up by Thomson McKinnon Securities in the 1980s, was wound up after a decline in the market, according to press reports.

Cowdery, a former life insurance salesman, made his fortune by buying closed life insurance funds through Resolution between 2003 and 2007.

He sold the firm for £5 billion ($9.5 billion) in May 2007, before the financial crisis, to Pearl Group, which was then headed by Punch Taverns founder Hugh Osmond.

Cowdery declined to say how much he's placed with Diamond Capital, which opened for minimum investments of US$75,000 on June 13. It's targeting US$20 million and will stop accepting money on July 22, said Langdon.

Misra, 48, who joined UBS in 2009 as global head of credit at its investment bank after leaving Deutsche Bank in June 2008, has said he was considering making an investment.

"We've got some strong support from some high-profile City personalities who like the concept and back the idea," Langdon said.

"Diamond prices have been increasing. There is definitely demand there for diamonds as an investment."

The Diamond Capital fund seeks to be different from predecessors by trading the stones as well as holding them in anticipation of prices rising, Langdon said.

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SSE to axe doorstep force after mis-selling scandal
Scottish & Southern is axing its entire 900-strong doorstep sales force, two months after being convicted of using "misleading practices" to persuade people to change energy supplier.
Rowena Mason - Daily Telegraph - 9th July 2011

SSE was convicted by a Surrey court in May of using a script that told people they were paying too much for their energy, when this was not always the case.

Alistair Phillips-Davies, SSE's generation and supply director, said: "Changes in products, services and processes mean the energy market has matured to a stage where we believe that commission-based doorstep sales is no longer a sustainable way of securing energy customers for the long term."

The move will put pressure on the remaining "Big Six" energy suppliers to wind down their doorstep sales teams, after blistering criticism from MPs about their techniques.

The energy select committee, chaired by Tim Yeo, called last month for energy companies to face a major investigation for doorstep mis-selling and pay back money they have wrongly taken from consumers. Mr Yeo accused them of "incentivising salesmen to lie".

The committee said the problem could be as "serious" as the banks' mis-selling of payment protection insurance (PPI), which may cost Lloyds Banking Group £3.2bn in compensation for consumers.

Yesterday, Mr Yeo said: "There has been mounting concern on my committee about doorstep selling and the possibility that vulnerable customers could be mis-sold energy packages that are not in their best interests. I hope that the rest of the Big Six do not wait for the regulator to step in before acting to ensure that their sales practices are resulting in customers getting the deal that is most suited to them."

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Outlook cloudy for Japan's world-beating supercomputing program
Masanobu Higashiyama, Ryoma Komiyama and Toshio Kawada - Asahi Shimbun - 9th July 2011

After producing a champion of the fast and furious world of supercomputing, Japan's high-octane supercomputer program is facing a murky future.

The K computer, developed jointly by the government-affiliated RIKEN research institute and electronics giant Fujitsu Ltd., has been christened as the best-performing number-crunching machine in the world, in an uplifting technological victory for a nation struggling with the aftermath of a devastating disaster.

The government-funded 100-billion-yen project to develop a system that can carry out 10 quadrillion calculations per second, or 10 petaflops, has had to ride out a series of crises: the pullout of NEC Corp. from the project, a proposed deep budget cut and the repercussions from the Great East Japan Earthquake in March.

Even though the RIKEN-Fujitsu machine has won the top spot in the world supercomputer rankings, there is no plan for K's successor, while the United States is working hard to reclaim the title.

There was unconcealed jubilation at RIKEN over the news. At a June 21 news conference in Kobe, Kimihiko Hirao, director of the RIKEN Advanced Institute for Computational Science, said: "I'm really happy about K being recognized as No. 1 in the world. I wish to express my profound esteem for the efforts made by Fujitsu and many other partners involved in the project."

RIKEN tried to make the most of the great public relations opportunity by hastily opening the K computer, usually inaccessible to the pubic, to the press.

K--the name comes from the Japanese word "Kei" meaning 10 quadrillion--is designed as a parallel computing system composed of 864 phone booth-sized cabinets each containing 102 central processing units (CPUs).

Although K will only come into public service autumn next year, it can already perform tasks at a dazzling speed. With just four of the cabinets in operation, K was ranked 170th among the world's Top 500 supercomputers last autumn.

For the latest rankings, K topped the list by clocking 8,162 trillion calculations per second, or 8.162 petaflops, with 672 cabinets of processors. That means K is more than three times faster than the previous champ, China's Tianhe-1A, which grabbed the title last autumn.

K could have failed to beat the Chinese rival if RIKEN had not been allowed to use 18.3 billion yen of the 28.5 billion yen earmarked for fiscal 2011 ahead of time in order to purchase some 300 additional cabinets. The additional system boards doubled K's calculation speed.

In March, a company manufacturing processors for K in the Tohoku region was hit by the disaster. The company's official in charge, who was finally reached one week later, told Fujitsu that the company could manufacture K's components. The supplier said it was ready to contribute to the national project.

In a June 20 news conference, Fujitsu Chairman Michiyoshi Mazuka lauded the dedication shown by this and other partners in bringing the project to completion. "We even received a word of encouragement (from the affected supplier). We were able to win the title of the world's No. 1 because of the enormous support we have received from our partners," he said.

When the complete system with all the 864 cabinets is ready to boot up in August, K will try to achieve the ultimate goal of making 10 quadrillion calculations per second for the next ranking of the top 500 computers, to be released in autumn.

But the Japanese creation will face more powerful foreign competitors as leading U.S. manufacturers are building systems that are as fast as or much faster than K.

One is a 10-petaflop system called Blue Waters being developed at the University of Illinois, to be completed in July, according to the Ministry of Education, Culture, Sports, Science and Technology. It will rival K in speed.

Two other extremely powerful supercomputers under development at U.S. labs, "Sequoia" at the Lawrence Livermore National Laboratory and "Titan" at the Oak Ridge National Laboratory, will be 20-petaflop machines, or capable of performing calculations two times faster than K, when they are completed next year.

In addition, a project is already under way in the United States to develop a 100-petaflop system by around 2018, with a prototype now in the works, according to the science ministry.

Meanwhile in Japan, the supercomputer program is in jeopardy due to the budget crunch.

"We want to follow up with a new project (to develop K's successor), but we don't have such a plan at the moment," said the official in charge at the ministry. "This year, we need to put the priority on reconstruction from the disaster. We want to secure funding (for a new supercomputer project) in our next budget request, but that may be difficult."

But why supercomputers?
The performances of personal computers get better every year even though most consumers use them only for sending e-mail and browsing the Internet.

It is, however, still difficult for the public to understand the need for developing such ultra powerful computers.

Researchers in nanoscience and life sciences have already started trial use of K, and the development of software needed for making the supercomputer available for use by customers has begun.

There is no denying that the mission of the K project has become fuzzier because K was designed as a general-purpose computer to carry out all kinds of heavy duty tasks.

Satoshi Matsuoka, a professor at the Tokyo Institute of Technology who developed Tsubame 2.0, which came in fifth in the latest ranking, says shooting for the top spot is for claiming technological leadership.

International recognition as a top-tier machine translates into sales. NEC is globally marketing its supercomputers based on technologies used for the Earth Simulator, which sat atop the supercomputer rankings from 2002 to 2004, and Tsubame. Fujitsu plans to roll out a commercial version of the K computer next year.

"A supercomputer is a marvelous amalgamation of technologies," said Matsuoka of the Tokyo Institute of Technology. "If Japan achieves technological leadership in this field, there will be Japanese technology in all supercomputers in the world."

K is more energy efficient than might be expected.

Initially, K was expected to consume 30,000 kilowatts of power. But actual operation has shown that it will only use 17,000 kilowatts at most. For ordinary operation, 12,000 to 13,000 kilowatts will be enough.

In the November list of the world's most energy efficient supercomputers, as measured by calculation performance per watt, K was ranked fourth. Engineers in the K development team claim it is one of the most energy efficient general-purpose supercomputers.

Two 5,000-kilowatt gas turbine generators are in place to power K. Usually, only one of them is in operation. The two generators, if both are operated, can provide 70 percent of the electricity K consumes. A member of the development team says, "We can respond to calls for cuts in electricity consumption (by operating both generators) without affecting K's work."

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JPMorgan set to replace Bank of America as biggest bank in US
Economic Times - 9th July 2011

JPMorgan Chase & Co is close to vaulting past Bank of America Corp to become the biggest bank in the United States, but it will likely get there in an odd way - by shrinking less than its rival. Both JPMorgan Chase and Bank of America are getting smaller as they shake off the excesses of the years leading up to the financial crisis.

If JPMorgan becomes the biggest, chief executive Jamie Dimon could see the validation of his cautious management before and during the crisis. Bank of America's drop to second would illustrate how former Chief Executive Ken Lewis saddled the bank with bad acquisitions that are hampering current CEO Brian Moynihan. But bigger might not be better.

Being the largest does not necessarily translate to higher profitability, or a higher market value. Global banking regulators are imposing higher capital requirements on the largest banks and threatening even higher capital charges if they grow.

"Big is more a burden than it is a bragging right," said Gary Townsend , chief executive of asset manager Hill-Townsend Capital, a Chevy Chase, Maryland-based money manager that specializes in financial stocks and owns shares of both banks.

That is a switch from the years when Bank of America was buying up banks to cater to the American appetite for more and more borrowing, said Ray Soifer, a long-time bank analyst and now industry consultant at Soifer Consultant in Green Valley, Arizona. "Bigger was better and banks were happy to be at the top," said Soifer.

JPMorgan has been gaining ground on Bank of America for three straight quarters. At the end of March, JPMorgan's $2.20 trillion of assets were just 3.4 percent short of Bank of America's $2.27 trillion.

JPMorgan already is the most valuable bank in the stock market, with its equity worth nearly 50 percent more than Bank of America's. Analysts differ as to how soon the switch could happen. Deutsche Bank's Matt O'Connor sees JPMorgan becoming the largest by year end.

FBR Capital Markets' Paul Miller says it will be the next 12 to 18 months. But however long it takes, analysts agree neither bank is going to be stretching.

"It is really going to be who shrinks the least," said Gerard Cassidy, an analyst at RBC Capital Markets . Even if JPMorgan becomes the largest U.S. bank by assets, it would not be the biggest in the world.

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Professor Zuckerberg's figures add up to economic collapse
Stephen Foley - Independent - 9th July 2011

Mark Zuckerberg has been trying out his likely pitch to investors for the stock market flotation of Facebook, and it has all the hallmarks of a bubble-era pitch.

At corporate HQ this week, unveiling his company's partnership with Skype, the social network founder declared that the number of people using Facebook was no longer a metric they cared about very much. They care so little, he said, that they couldn't be bothered to announce they had passed the milestone 750 million users.

So if not user numbers, what? Surely not profits, or revenues, or number of advertisers? No, of course not those things.

The metric Mr Zuckerberg spends his time watching is "number of things being shared". Whether it is posting a video or sharing a link or liking your local banana milkshake vendor so much you just have to tell all your friends about it, the number of things shared on Facebook has doubled in the past year, he said, and he expects it to double again next year, and again the year after.

He even has a slide presentation showing exponential growth, and a professorial speech about how growth that fast has to be "log normalised" to be shown on a graph.

This prompted the New York start-up investor Chris Dixon, who is better at maths than I (and Mr Zuckerberg, it would seem), to point out that on this day in 2031 you will be sharing 1,048,576 times as many things as you did yesterday, according to Zuckerberg's Law. While that obviously implies the complete economic collapse of the West, as no one will have any time to do any actual work, it does mean Facebook will be a very valuable company.

Mr Zuckerberg has built a huge, fast-growing and sustainably profitable business, and it will command a hefty valuation at its initial public offering, when that finally comes. It is, however, in nobody's interests for its shares to be priced impossibly high, no matter that it might want to keep up with the Zyngas and the LinkedIns, which already have a tech bubble priced in.

Let's retire the log normalisation graph before things get out of hand.


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Asset managers seeking extra funds
Five companies gain green light to raise cash for gold investment
Feiwen Rong - China Daily - 8th July 2011

China's asset managers, who have been approved to raise $70 billion for allocation overseas, are seeking additional funds to invest in gold and precious metals as soaring inflation spurs interest in alternative assets as a way of protecting wealth.

This year, five companies have been approved to raise cash for investment in precious metals products overseas through the qualified domestic institutional investors program (QDII), said Hu Miao, an analyst at the Shanghai-based fund research firm Z-ben Advisors Ltd. Twenty more applications for resources and commodity investment are pending, said Hu.

Gold climbed to a record in May as rising inflation and concern about the global economic recovery spurred demand for an alternative asset. China became the largest physical gold investment market in the first quarter, according to the World Gold Council. Lion Fund Management Co was the first to place money in foreign gold exchange-traded funds (ETFs), raising more than 3.2 billion yuan ($495 million).

"There's a discernible surge in new QDII products that are linked to gold and precious metals this year. It's a hot theme," Hu said from Shanghai. Investors favor gold after its rally and as other investments, including equities, haven't performed as well, Hu said.

The QDII program, which allows purchases of overseas financial assets from within China, had approved $68.4 billion in investments by the end of last year, according to the State Administration of Foreign Exchange. The total amount now is about $70 billion, said Z-ben's Hu.

Gold demand in China, the world's largest producer, is expected to continue rising as economic growth boosts wealth and as inflation, rising at the fastest pace in almost three years, drives demand for alternative assets.

Investment demand more than doubled in the first quarter to 90.9 metric tons as the nation overtook India to become the largest market for coins and bars, the World Gold Council said in May.

Exchange-traded funds, which trade like shares, enable investors to buy commodities such as metals without taking physical delivery. China doesn't have gold ETFs and investors usually choose to buy physical gold or contracts traded on the Shanghai Gold Exchange and the Shanghai Futures Exchange.

Consumer prices in China advanced 5.5 percent in May, the most since July 2008 and exceeded the government's target of 4 percent every month this year. The People's Bank of China said on Wednesday it had raised interest rates for the third time this year to curb inflation.

"When Lion Fund introduced the first gold product, it received a lot of attention as investors were looking for ways to hedge against inflation," said Lu Huitian, an analyst at Howbuy.com, an independent fund researcher that specializes in advising investors. "Another reason is that the normal spectrum of fund products only offers exposure to equities and bonds."

Other companies have been quick to follow. Harvest Fund Management Co, backed by Deutsche Bank AG, has received approval to raise money for a gold-themed fund, said Yang Yang, manager at Harvest. The fund will start raising money this month, Yang said, without disclosing the target amount.

China Universal Asset Management Co, whose investors include China Eastern Airlines Corp, was cleared to start a fund that will invest in ETFs backed by gold, silver, platinum and palladium, according to Liu Min, a spokeswoman in Shanghai.

Efund Management Co raised more than 2.6 billion yuan for its gold fund in May, with investments in overseas ETFs or gold equities funds, said Zhang Xiaogang, manager at the fund. Bosera Asset Management Co raised $300 million for its inflation-themed fund by the end of April, with about 20 percent of the portfolio marked for precious metals, said Zhang Qiang, Shenzhen-based fund manager, in May.

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India Post to lose its monopoly;
govt. forces courier companies to charge double rates
Economic Times - 9th July 2011

A planned overhaul of a 113-year-old postal law proposes to end government monopoly completely in the next decade and a half, but, ironically, sets the clock back for courier companies, which are governed by a different policy at present. The draft Post Office Bill 2011 aims to open the letter mail segment to the private sector in 15 years by withdrawing all exclusive rights to India Post and removing all pricing curbs on private courier companies. The Department of Posts has sent the draft bill for cabinet approval to replace the archaic Indian Post Office Act 1898. The amendment will also provide greater legitimacy to the courier industry.

"Considering the role of couriers in the present economy, opening up the letter mail sector to them will not only accord legitimacy to the private operators but also would be recognition of market reality ," said an official in the department privy to the cabinet note. Courier companies are not celebrating , though. They say the transition regime proposed is too harsh and could end up killing the over Rs 7,000-crore domestic industry that engages nearly one million workers and pays Rs 1,200 crore in service tax.

In the run-up to the complete deregulation , the draft bill has proposed to open the express mail segment (EMS) with a "reserve area" of 50 gm for all articles at a price multiple of twice the government EMS rate. That is, a courier firm will have to charge at least Rs 50 for a package weighing up to 50 g, which is twice the Rs 25 charged by India Post for its Speed Post service for a similar package. At present, couriers are allowed in the EMS segment without any restriction or price, making the market fiercely competitive. The reserve area regulation will give India Post time to prepare for a more competitive regime.

"The proposal to have a reserve area for EMS is unfair and will lead to anti-competitive behavior by the postal department," said Vijay Kumar, chief operating officer, Express Industry Council of India . It could lead to the extinction of the courier industry, he said. Introduced in 1986, Speed Post is the only EMS service provided by India Post. The department has strongly defended the proposal to impose a reserve area by citing international examples. Globally, postal deregulation has been in phases and exclusive rights for state-run postal business still exist in many countries. In India, the courier industry has run ahead of the postal laws because it was allowed under the foreign direct investment regime, which allows 100% overseas investment in the business. International courier companies, such as DHL , TNT, FedEx and UPS , secured FIPB approval under the 100% FDI route.

The bill will now recognize them under the postal law, but the proposed transition turns the clock back somewhat by imposing restrictions that did not exist earlier. "Over 60% of the business for small- and medium-sized courier business in India is dependent on document delivery, which is typically within the 50 gm weight segment ," said RK Saboo, deputy managing director, First Fight Couriers. The proposal was retrogade and would force small courier firms to close down, he said.

The private industry is also not enthused by the entry in the normal mail business, or letter mail segment , where the draft bill has fixed a reserve area of Rs 150 gm for all registered couriers at a price multiple of Rs 2 times the postage of letter mail. The industry says India Post service is highly subsidized , which industry says will make it difficult for it to compete. The bill, which is likely to be introduced in the forthcoming monsoon session of Parliament, has also proposed to simplify registration and licensing of couriers without charging any fees. Most large domestic courier companies in the country like DTDC, First Flight and Skypak are all registered with the Registrar of Companies

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From skate ramps to chocolate fountains: Why dotcom offices still party like it's 1999
Tom Peck - The Independent - 9th July 2011

It used to be company cars, pensions and private healthcare plans that lured bright young things in to otherwise dull office careers.

Now, with the second tech boom in full swing, a new generation of companies is luring talented people in rather different ways.

Skating ramps, tents for napping, indoor treehouses, chocolate fountains, gourmet meals and "Yoga Tuesdays" are among the latest examples of the "perk bubble", as emerging tech companies compete for the hottest coders in town.

Airbnb.com, founded by 29-year-old Joe Gebbia, is a website where people rent their homes or rooms directly to holidaymakers. At the centre of its San Francisco offices is a two-storey tree-house, as well as an Eastern mysticism-themed "peace room", and a section of an out-of-service jet.

Staff regularly work late into the night, and at weekends, so playtime needs to be taken seriously. "Moustache Monday" is regularly declared on a social calendar stuck on the wall, encouraging staff to wear false moustaches for the day. Yoga sessions are before a company lunch on Tuesdays.

Thursday is the day for "recess", with accompanied fun and games. Last Friday there was a rooftop barbeque, on Saturday an air-guitar contest. This month, rapper M.C. Hammer is visiting.

Technology companies maintain it is a crowded marketplace for young talent, and the esoteric perks are necessary to attract, and keep, staff. Although California is the centre of the perk bubble, it is a phenomenon increasingly seen in the UK. Music streaming website Last.fm, a British company founded in 2002 and sold to CBS for £140m in 2007, often throws parties in the giant ball-pit in its east London office.

Back in the US, at Yelp.com, a user review site which passes verdict on everything from rock concerts to supermarket pies, three beer kegs sit in the "break-room", with inbuilt iPads informing staff what brew is inside.

Online storage site Dropbox features a "rock-room" where employees play guitars and drums. Another is used to play dance arcade games. At Google's Zurich office, staff descend to the canteen down metal slides.

Yet worryingly, the extravagance of one's office is by no means an accurate barometer for a company's success. The iPhone app Color launched in March to much fanfare, promising to revolutionise the way photos were shared, but four months later, the president has gone and the revolution has not been forthcoming. Yet the staff still sit on beanbag chairs, indulge in nap-time in special tents and take turns on a hand-built half-pipe skateboard ramp in the middle of the office.

Airbnb is faring rather better. Bookings have increased by 800 per cent in the last year. "I think it feels like home," founder Joe Gebbia told the Wall Street Journal, perhaps because the entire 25,000sq ft office is based on his own apartment.


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Buy-to-let boom winners and losers. Hello 'generation rent': goodbye social mobility
Ian Cowie - Telegraph - 8th July 2011

Just 15 years after the first ‘buy-to-let’ mortgage was marketed in Britain, the number of people in privately-rented accommodation is now greater than those in council and housing association properties combined. This is the first time that has been the case since the 1960s and the long term trends which led to this state of affairs are unlikely to be reversed any time soon.

Young people who feel frozen out of home ownership by high house prices and condemned to pay their landlords’ mortgages on privately-let accommodation had better get used to being part of‘generation rent’.

These are among the main conclusions of a wide-ranging analysis of the housing market by Adrian Coles, director general of the Building Societies Association (BSA), based on raw data from the Department for Communities and Local Government.

Mr Coles said: “This historic switch is the result of three very long-acting decisions made by the Thatcher governments of the 1980s. First, the right to buy policy, introduced in 1980, which resulted in the transfer of substantial stock from the social rented to the owner-occupied sector.

“At the same time, that government signalled the end of a substantial house-building role for local authorities, removing any possibility that the sold stock would be replaced by new-build.

“The third reform came later – the deregulation of the private rented sector. That sector had been destroyed by the rent controls and security of tenure measures that were introduced on a ‘temporary’ basis in 1915, providing a strong incentive to landlords to sell their stock, which they steadily did for the next 75 years.”

Then the late 1980s saw the introduction of assured shorthold tenancies, allowing rents to be set at market levels and giving landlords the right to recover their property at the end of the agreed tenancy period. By 1996 the first buy-to-let mortgage, under that name, was marketed by Clydesdale Bank, with Mortgage Express not far behind.

Since then, the percentage of the population in privately-rented accommodation has doubled to 16pc, while the numbers in council and housing association homes have halved to just below that figure – and owner occupation has slipped from a peak of 71pc in 2003 to nearer 67pc today.

Mr Coles commented: “Taking the long view, we can now say that the owner-occupation percentage has shown no growth for the last 20 years.

“A variety of complex factors have increased the costs of becoming an owner-occupier, while the risks faced by over-leveraged borrowers and lenders have also become very apparent.

“These trends are not likely to reverse in the near future. Rather the prospects of slowly rising interest rates, job losses in the public sector, squeezed real personal disposable incomes, and an aversion to debt make a continuation appear much more likely.”

Can it really be true that the British are being weaned off their addiction to bricks and mortar? Not everyone thinks so. David Hollingworth of London & Country Mortgages said: “Continued growth in the rental market will depend on whether there will be a fundamental shift in Britons’ property-owning aspirations. I still think that the property bug has not left them and, if we do see a freeing up of mortgages and more affordable property, then first time buyers will return.”

Rent is, after all, a terrible waste of money from the tenants’ point of view. As pointed out in this space before, credit-fuelled home ownership was a far more effective accelerant for social mobility than any number of government initiatives. Higher deposit requirements and lower owner occupation mean more people who start life with nothing will end with nothing.

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Investors hit by surprise Standard Life fee increases
Tim Sharp - Herald Scotland - 9th July 2011

Investors have been told to stump up more money if they want to invest in funds run by some of Standard Life Investments’ top fund managers such as smaller companies specialist Harry Nimmo.

SLI has bucked an industry-wide trend towards lowering fund fees by telling investors it is upping the charges on seven of its top funds.

For instance the annual management charge (AMC) for private investors in Mr Nimmo’s UK Smaller Companies fund is to rise from 1.5% to 1.6% from November 1.

There is an identical increase in the charge for the Standard Life Investments Global Equity Unconstrained fund run by Mikhail Zverev.

The charge on a suite of fixed income funds, including the Edinburgh house’s Global Index Linked Bond, UK Gilt, Corporate Bond, Select Income and Higher Income funds, is to rise from 0.95% to 1%.

Jacqueline Kerr, head of UK wholesale at SLI, said: “We conduct regular reviews of our products to ensure that we offer a simple charging structure which offers consistency across the range while remaining competitive within the market.

“Within our fund range we have a number of bond funds which were launched with an AMC of 0.95%.

“The charge has been held at this level since launch, in some cases as much as 16 years.

“However, following the most recent review, the AMC on these funds has been increased to 1%.

“This is a level which we believe is consistent with other funds offering similar market exposure.”

She said that the other two funds have also had their charges brought into line with similar funds run by the house.

“Standard Life Investments remains committed to providing exceptional investment returns, a competitive charging structure and offering value for money to our customers,” she said.

However, Duncan Glassey, partner at Edinburgh-based wealth manager Wealthflow, told The Herald: “We think the fund manager industry in the UK is already expensive relative to other places, particularly the United States.”

He said that when dealing and other charges are added on top of the management charge, investors can find themselves paying as much as 2.5% a year. This, he said, can eat into the returns they get from their investment

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The sunshine foods: M&S fortifies products with vitamin D to tackle rickets

James Tozer - Daily Mail - 9th July 2011

It's no secret we’ve been somewhat starved of sunshine so far this summer.

Now a range of supermarket products aims to tackle the health problems caused by a lack of ‘sunshine’ vitamin D.

The line of fortified milk, yoghurt and fruit juices at Marks & Spencer is due to be extended across much of the country in time for autumn.

It contains other nutrients such as calcium and omega 3 and costs the same as equivalent products.

Vitamin D – found in fresh oily fish, liver and eggs – is the only vitamin produced by the body, but it is mainly formed by exposure to sunlight and many Britons do not have enough of it.

Deficiency leads to diseases such as rickets in children to brittle bones in the elderly. Low levels are also linked to a higher risk of heart disease, cancer and diabetes.

M&S says the Simply More range has proved a success since its launch in select stores in spring, with the prune-flavoured yoghurt outselling standard varieties.

Vitamin D strengthens teeth and bones, and studies suggest it may help to prevent Alzheimer’s. In England, half the population is low in vitamin D when winter ends. In Scotland the figure is as high as two-thirds.

Margarine has been fortified with vitamin D since 1940, and Government scientific advisors last year proposed adding it to milk too.

M&S nutritionist Claire Hughes said: ‘We want to make it as easy as possible for our customers to stay healthy and get their daily dose of vitamin D without having to worry about getting out in the sunshine.’

Registered dietitian Ursula Arens said some breakfast cereals have been fortified with vitamin D for more than a century. She added: ‘There has been a wave of interest recently in vitamin D, and people who are being encouraged to increase their intake may well see health benefits from consuming these kind of products.'


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