The field trip to the Port of Los Angeles solidified a number of the concepts we’d discussed in class with respect to international trade, but one particular aspect left me with more questions than answers: security.

Even with the massive number of containers being unloaded off multiple cargo ships, the port included only one relatively small area in which the contents of containers were checked. Otherwise, they were stacked, and loaded as efficiently as possible to get them onto trucks to have their contents distributed as quickly as possible.

According to Rep. Janice Hahn (D-Calif.), who introduced legislation that would reserve federal funds to improve port security, only three percent of incoming cargo is scanned.

With the passage of the Trans-Pacific Partnership, which will further open up US trade with other nations along the Pacific, west coast ports are likely to see a surge in traffic. Does that mean three percent turns into two or one?

Hahn’s Scan Containers Absolutely Now Act, commonly (and fortunately) known simply as the SCAN Act, was introduced in the House a little more than a year ago and, from a brief news search, was never heard from again. Despite the ridiculous name, the bill points to a very real—and thus far, unaddressed—issue.

We spent two hours touring and having multiple people tell us how critical the port is to the US economy and, by extension, the world. A trade agreement that will increase the amount of traffic to the west coast’s busiest ports has been passed just ahead of what is already the ports’ busiest time of year.

Did I mention that more than 95 percent of containers passing through ports go completely unchecked?

Given the US’s often frosty relationship with growing economic power China, that country’s increasingly friendly relations with its neighbors (see: Regional Cooperation Economic Partnership) and rising global tensions that include what basically amounts to a proxy war with China’s neighbor Russia, is it really that far-fetched to think that negligence on port security might be an actual problem?

Of course, authorities assuredly have security measures in place that are invisible to the public, but given the fact that local legislators felt the need address it in Washington, it seems that an issue may remain.

It just seems from the outside that the level of oversight doesn’t match the relative importance of the ports to global trade. Given the short-sightedness of most legislators, that seems unlikely to change.

On October 5th, 2015, the United States and eleven countries in the Pacific Rim finalized a trade agreement after five years of negotiations. Since the release of information surrounding the agreement, many people now know it contains a range of international trade issues including comprehensive market access. According to the Office of the U.S. Trade Representative, the Trans-Pacific Partnership will eliminate or reduce tariffs and other trade barriers in order to create new trade and investment opportunities for businesses and consumers.

Seaports, which constitute a major part of the U.S. economy when it comes to exports, have the potential for the most growth from the reduction in tariffs. The American Association of Port Authorities says for every additional $1 billion in exports shipped through U.S. seaports, U.S. jobs increase by 15,000. The Port of Los Angeles, for example, has a special position as one of the major ports connected with Asia and the Pacific Rim. Michael Keenan, the director of planning and strategy at the port, believes services industries at Long Beach and in Los Angeles as a whole have a positive future ahead as trade rises.

“There are about 15,000 longshore workers that support the Port of Los Angeles and Long Beach,” said Keenan. “On top of that, there’s a huge number of railroad, warehouse and logistics workers. Trade through the port supports about 190,000 jobs in the region and under an engrossed growth scenario with the TPP, we see that number going up.”

Before the Great Recession, exports coming into Long Beach were growing at 10 to 12 percent. The financial crisis brought cargo activity down to about 3.5 to 4 percent. Keenan looks at the TPP as a way to not only boost cargo activity, but the amount of jobs in the city of Los Angeles.

Another interesting part of the Trans-Pacific Partnership was the exclusion of China from the negotiations. Although China is a major trading partner with the U.S., Keenan does not think the TPP will have an effect on trade with the Asian country. However, there could be greater opportunities for smaller countries in the region.

“I think a lot of China’s neighbors are interested in being part of an agreement that offers them a set of advantages against China.” said Keenan. “If you’re trying to be competitive against the big dog on the street, the best way to do it is to find a set of friends who have that same interest. It offers our other friends in Asia a closer relationship with the U.S., which helps us.”

Despite the positive results of the multi-part agreement, there are some downsides to the TPP in relation to the ports. The U.S. economy continues to grow stronger, but its trading partners’ economies have grown weaker and it makes goods from the United States less competitive in the global marketplace.

“I think that’s the bigger challenge. Something like TPP that offers offsetting advantage could certainly help us, but the biggest driver for exports is going to be shared growth where other countries develop stronger economies and they can buy more of what this country produces. I have high hopes we’ll be able to see that within the next five to ten years.”

This just in: Los Angeles could become the only city to host three Summer Games other than London.

With the 2024 Summer Olympics nine years from now, Los Angeles was chosen Tuesday to be the new official U.S. bidder for the Games, replacing Boston after the city’s campaign surrendered to local opposition.

(The Los Angeles Coliseum/Source: The New York Times)

When we talk about economic opportunities related to sports events, we usually think of vast investments in sports venues, infrastructure, public transportation, and human capital, etc. However, historical data reveal that the Olympics hosting right has been an economic indicator of stock markets.

A study conducted by Bespoke Investment Group shows that under most circumstances, stocks markets rally during the Summer Games because investors are mostly distracted from gloomy headlines. Most of the times, the so-called Olympics Indicator is found to be a leading indicator of a rising stock market.

The study included the performance of the Dow Jones Industrial Average during the Summer Games since the 1900 Paris Olympics. It also calculated the market performance of hosting countries during the games since the 1984 Los Angeles Olympics.

The claim that investors are distracted by the games appears to be a little bit bizarre. However, from 1900 to 2008, the DOW had an average gain of four percent and the index was positive two thirds of the time. Therefore, if you buy $10,000 worth of stocks on the day of the opening ceremony and sell all of them on the closing day (that’s usually 14 days,) theoretically you can earn at least a brand new Apple Watch.

What about the stock markets of host countries? Since 1984, only two out of seven games have seen a negative growth in host countries’ stock markets. Both cases occurred because they were right in the middle of the dot-com bubble and the 2008 financial crisis, respectively. The average gain was 1.86% according to past performance of stock markets.

(Source: Bespoke Investment Group)

Even though there is no strong evidence showing a causal relationship between the Olympics Games and stock markets, it can be drawn from historical data that stock markets tend to perform better during the games. That’s partly because markets gain a sense of optimism and counteract the negatives in most years.

For investors seeking short-term profits, don’t just sitting in the couch watching the games. The Olympics Games can be an indicator for a positive market. Buying some Nike or Adidas stocks may be a good decision.

Sources:

USOC names Los Angeles the official U.S. bidder for the 2024 Summer Olympics

The Olympics Indicator

When Farm Prices are low, farmers aren’t necessarily pessimistic. Farm Futures’ first survey of 2016 demonstrates that farmers are eager to plant more crops on their acreage no matter the circumstances.

At the beginning of this month, the Department of Agriculture released an index of prices received from farmers for their current month.  This index measures crop prices, livestock, and product prices. The outcome is farm prices – m/m % change is down -1.9% with an overall -5.7% and farm prices – y/y% change is down -7.1 with and overall -10.0%. The drops in numbers are mostly because of poor weather conditions earlier in the year.

Though the chart tells the public one thing, farmers express another.

Like the economy, there are many factors to farming that can affect its status. According to the article Farm Futures’ 2016, planting intentions survey shows low prices won’t deter grower’s conditions. Bad weather that occurred last fall interrupted crops like the red wheat in the Midwest. Wheat grounds in other areas could shrink, with farms predicting only to plant 40.4 million acres in the fall, which are about 220,000 lower than last year.

“While profit margins remain in the red, farmers are reluctant to cut acreage, knowing that volatile crop prices can turn around quickly if weather problems emerge,” said Farm Futures market analyst Bryce Knorr, who conducted the survey.

Even though the percentages of farm prices are low, the survey mentioned earlier, Farm Futures’ first survey of 2016, gives a different attitude for agriculture.

After farmers took this survey, it showed that they plan on planting 89.65 million acres of corn which raises the number 1% from 2015. Soybeans could have a jump in growth as well. The report indicates that Farmers would like to plant 86.32 million acres of soybeans, which raises it 2.4% more than was previously estimated.

The fact that farmers are finding other ways to be productive, even though farm prices are low, gives the future hope. Even when the market is not doing the greatest, it does not necessarily mean it will stay that way. Food is a basic necessity that humans need; therefore food products are extremely important. Farmers and economists know this and that is what makes The Farm Prices graph so interesting. Obviously, farming will continue and more products will be created no matter what the economy looks like. Farmers’ eagerness to expand their product and invest more in other produce is a sign of adapting to the economy and its demand.

Tencent’s Digital Media Marketing Department manager gives speech regarding the collaboration between HBO and Tencen Video (v.qq.com)

Web-TV service, such as Netflix and Hulu Plus, is growing rapidly, which has forced pay-television network HBO to release its own online-streaming services and step further into Asian market: to distribute TV dramas and movies through the Chinese Internet giant’s online video.

Globally, different from Netflix that directly launches its service in foreign countries, HBO licenses its programming to Tencent, a famous investment holding company whose services include social network, mass media, e-commerce and online games.

Its new deal with Tencent hasn’t disclosed the financial details or broadcast schedules. According to Wall Street Journal, HBO’s international business accounts for about one-quarter of the company’s $4.9 billion in annual revenue. And last year, it added 10 million users overseas, which is twice as many as HBO and Cinemas added domestically in the past decade.

Nonetheless, customers outside of the U.S. pay much less money than Americans for HBO’s programs, which, in other words, the company doesn’t generate a lot of revenue from licensing its programming.

Besides, the Chinese government censorship and local competitors – Youku Tudou Inc. and some internet-pirate sites – still make people feel uncertain about HBO’s future in Chinese market. Bloomberg reporter Xin Zhou said that a pay-to-view channel run by China’s state broadcaster CCTV aired a cut version of “Game of Thrones.” To maintain the program quality and satisfy the viewers without provoking the government seem to require a longtime negotiation among different parties.

HBO Go: An online-streaming site that is only available for cable subscribers in the U.S.

Thus, as HBO is shifting its sights on international markets, it’s also ready to create a broadband-only service, which further disrupts the pay-television industry.

In the U.S., since it has to split the revenue with cable distributors, HBO finds it’s getting tougher to profit and dominate the market with current business model. Netflix charges subscribers $7.99 to $11.99 per month, while HBO charges $13 to $15 per month. Although Netflix’s total subscribers were not even half them of HBO, its subscriber revenue inched past that of HBO in the second quarter of 2014: $1.146 billion compared to $1.141 billion for HBO.

Also, HBO didn’t plan to offer its online services to non-pay-television subscribers until Time Warner Inc. CEO Jeffrey Bewkes announced on Oct 16, 2014 that HBO will offer its own online-streaming in 2015. This announcement immediately led TWX stock to soar 8.7 percent.

TWX stock soared 8.7% in just over 30 minutes

The online-streaming service will bypass the cable middleman and deliver the shows directly to the viewers. It aims to adding 10 million broadband-only users who consume video online.

HBO’s series of plans do provide an alternative for cable providers.

A policy change that will enable U.S. and Chinese citizens to visit each other’s countries repeatedly within 10 years has been announced at the conference of world leaders in Beijing; and it has been already gone into effect. Business and short-term visit visas, which used to expire after one year, will be valid for 1o years and allow a larger number of population travel back and forth between the U.S. and China.

In 2013, 1.8-million Chinese visitors came to the United States and brought an estimated $21.1 billion to the economy.  The Federal government predicts the economic impact of the loosened visa restrictions could be $85 billion by 2021, according a white house statement reported by the Los Angeles Times.

Majority of the media coverages focused on the economic spur the incoming Chinese tourists may bring to the States. Nevertheless, few wrote about the other side of the story: the policy change will also have an effect on the U.S. citizens’ visa for China. The new 10-year visas available to US passport holders will make travel to China easier for those who qualify.

A policy making process sometimes is the joint-consideration of both international relations and market demand. In the case of the 10-year valid visa, it seems like the policy shift may have something to do to with China’s inbound tourism industry. Unlike the large surplus on manufacturing, China’s tourism industry has been suffering deficit ever after 2009. The deficit pushed the local travel agencies and accommodation providers to price their service lower, sometimes even lower than the cost, to keep the business running.

It may not be just a stereotype for Chinese to picture the U.S. visitor as spenders. According to a report from BBC, the travellers from the United States were actually the No.2 travel spenders in Asia, closely followed by Germans.

At the same time, foreign tourists have slowed down their adventures in China. In the year of the 2008 Beijing Olympic Games, the number of the foreign tourists in China reached its peak at 6.15 million. Since then, the number has been shrinking, though it did bounce up a little bit in the year of 2010. The United States of America-China Chamber of Commerce (USCCC) said in a statement that the relatively high standards for L visas are one reason Beijing has seen declining tourism numbers. Programs such as 72-hour, visa-free travel to Beijing have not been sufficiently easy or welcome to make the city attractive as a destination.

The USCCC also clarified some requirements in order to obtain the new 10-year visa. In order to qualify for 10-year visas, US passport holders must have more than one-year validity remaining on their passport. And, each entry will only be good for 60 days.

“As international relations can change quickly without advanced notice, we urge you to take advantage of this new policy and apply for your China visa at your earliest convenience. In addition, if your passport expires in less than one year, we encourage you to consider renewing your passport,” said the USCCC in their website post.

It is uncertain, but worth expecting a growing number of tourists from the States coming to China for visits. As predicted by Huffington Post blogger Kathleen Peddicord, “the boom will bring more and more higher-end choices.”

However, according to Peddicord, “the biggest challenge to travel in this region is language”. It is normal that desk clerks in local small hotels, cab drivers, bus drivers, waiters, and sales speak no English at all. And it could remain a long-term challenge for the Chinese tourism industry to equip with the level of service to satisfy the international travellers.