China and Russia Dump The Dollar

What happens to the dollar when China and Russia use their respective currencies for bilateral trade?

China and Russia have announced that they will use their respective currencies to settle bilateral trade accounts between them. Previously, China and Russia settled their accounts using other currencies, specifically the dollar.

Those in the know, state that the decision of China and Russia to use their own currency to settle their trade accounts with one another is largely based on their closer relations and a step towards protecting their domestic economies.

The Chinese yuan trades against the Russian rouble in the interbank market. China and Russia is sure to solidify additional trade agreements beyond that of their currencies and together, they are a powerhouse with a sufficient economy to support their endeavors.

Investments abound in the areas of energy, telecommunications and banking. For those who have the risk tolerance and the willingness to learn more, will profit greatly from their China-Russia interests.

The dollar’s slide against other currencies has cause much debate within many countries to reconsider the dollar. If, enough countries chose to segregate themselves from the dollar, the consequences are unforeseen for them and uncertain for the dollar, but one thing is for sure, speculation breeds a lot of activity in the financial markets. Profit from your understanding!

Tyson Foods Route To Profitability

Can a business raise their prices on a product that consumers are buying less of and declare an increase in profits? A rational individual with a sense of economics will probably tell you no, but Arkansas-based, Tyson Foods Inc. (Public, NYSE: TSN), United States no. 1 meat producer defies economics and raises its prices on chicken anyway. What do you think the consequences will be for Tyson in the short-term and also, in the long-term?

Overwhelming since the demand for Tyson’s products are essentially a result of consumer spending and consumer spending is based on the needs and wants of the consumer and the availability of products that are substitutes, Tyson may be in for a future profit shock.

During periods of economic uncertainty and immeasurable volatility in the markets, business that have pent up cash are holding on to it, since interest rates are at historical lows. Most businesses are skeptical of hiring or expanding their enterprises until they feel better about the economic outlook.

Persistent unemployment, underemployment and chronic unemployment fuels the instability in the economy. The inability for many to sell their houses and move to an area where there is employment opportunities, continues to drag down the housing market as the number of foreclosures continue their tumultuous spiral.

Who competes with Tyson?

Cargill, Inc. (Private) based in Minnesota.

Pilgrim’s Pride Corp. (Public, NYSE: PPC) based in Colorado.


Smithfield Foods, Inc. (Public, NYSE: SFD) based in Virginia.


What is Tyson’s market share?

Tyson is the largest producer of meat products in America.


When will Tyson’s profits start declining?

Tyson may experience declining profits if grain profits rise in the future and is unable to pass on the increase costs to its consumers. Tyson’s future profitability is also threaten by a plentiful supply of chicken at a time when demand for chicken is uncertain. An oversupply of chickens is also a possibility if other major poultry producers expand their operations.


Where will Tyson produce an increase in volume?

Tyson had increases in pork sales. The question we have to ask is whether or not the increase in pork sales related to seasonal demand, that is the holidays? Americans generally indulge in traditional Labor Day, Thanksgiving and Christmas meals of pork, beef, chicken and turkey.


How will Tyson sustain profitability?

Tyson will counter the increase in grain costs in its chicken business by becoming more efficient in its operations and increasing prices.

Tyson is noted to have a very efficient pork processing model that rivals the industry. Demand for its pork products are expected to rise domestically and overseas against an already tight supply. Beef, Chicken, Pork and Prepared Foods are some of Tyson’s pillar products.

When a business seeks to remain profitable by raising its prices to counter the price increases of its inputs (commodities), if the public has no other alternatives or substitutes, then it is a business model that may be able to sustain itself. In a competitive industry such as Tyson’s, consumers have a choice and many will choose to exercise it, if they feel they can get better value somewhere else.

Increasing operational efficiency while admirable, may not be enough to sustain profitability at the same time you’re raising prices. Americans may decide to consume less meat and export demand is largely depended on the health of the economy, both domestically and internationally.

National Security and Investment Security

Who would have ever thought that the U.S. would use their National Security laws to prevent or restrict what component or components, that can or can not be used in a network or product. Well, that happened this week and it is reason of concern, not so much from a physical security standpoint, but from an investment security point of view.

Anytime the U.S. government restricts a corporation from providing critical components for the infrastructure being built in the United States, it is like the government once again intervening in the free market and the free market becomes less free, but more and more affected by government intervention.

Sprint Nextel Corp. is building out its 4G Network, both Wimax and LTE and will be excluding Huawei and ZTE from its contracts on the premise of in the interest of National Security. The United States Defense Department is asserting that they are concerned about the close ties between Huawei Technologies Ltd. and ZTE Corporation’s and the Chinese government and military. The concern is that there are security issues when you allow Huawei’s and ZTE’s components into the U.S. infrastructure.

On the surface this sound like a plausible argument, in that if the U.S. allows Huawei and ZTE components into U.S. infrastructure, the Chinese government and military could extract critical information by disruption or interception and use that information for their competitive advantage, commercially and militarily.

The U.S. government gave ZTE it’s government security approval and certificate for its network infrastructure, making ZTE the first Chinese vendor to receive this coveted certification. The certification is handed down from the National Institute of Standards and Technology (NIST) for Federal Information Processing Standards (FIPS). You can read more about ZTE’s government certification here.

If, the U.S. government blocks Huawei and ZTE from supplying the necessary equipment for America’s 4G, Next-Generation infrastructure,will Cisco and French-based Alcatel-Lucent, Hewlett-Packard and Juniper Networks become the beneficiaries. What about Sycamore and Corning, what role will they play? In part it’s going to be interesting to see how the U.S. government directly imposes restrictions on Huawei and ZTE, because indirectly Huawei and ZTE will continue to supply its numerous subsidiaries, such as Futurewei Technologies in Plano and its vast network of vendors, such as NTCH Inc. in Los Angeles.

There are so many companies and telecoms in America who depend on ZTE and Huawei products for their network and no amount of regulating is going to totally stop Huawei and ZTE from doing business in America, because Huawei and ZTE supplies everyone we do business with who don’t have Chinese names, such as Alcatel-Lucent, Verizon, T-Mobile, MetroPCS and a dozen or more regional wireless companies. You would have to shut down the entire Internet in America and also the wireless carriers to render any kind of restriction on Huawei and ZTE, because their equipment is already so embedded in our infrastructure that the Defense Department is just waking up to realize the potential threat.

Don’t forget that many of the components that make up CDMA networks, WIMAX and LTE networks are sourced from China by Huawei and ZTE subsidiaries and other vested vendors. Here are some little known handsets supplied by Huawei and ZTE.

MetroPCS sells several Huawei handset models, the Huawei M750, M328 and the Huawei Ascend.

T-Mobile’s Tap smartphone is the Huawei U7519.

Verizon’s Salute smartphone is from ZTE, as is many components that Verizon is using for its network infrastructure. MetroPCS offers several phones by ZTE, the ZTE Essenze, C78 and the ZTE Agent.

More than a few components and critical equipment used to run the Internet now and in the future is supplied by Huawei and ZTE and there is little the U.S. government can really do about it unless it wants to shut down the Internet and the wireless telecommunications and landline infrastructure. The bottom line for the U.S. government is National Security and the bottom line for corporations are profits. Anything that hampers the free hand of trade and the free market corporations will oppose directly or indirectly and last time I checked, corporations pretty much fuel politics in America and the rest of the world, so it will be interesting to see what happens.

P.S. Don’t forget that we sold the Hummer division that GM used to own to Sichuan-based, Tengzhong Heavy Industrial Machinery Company. Tengzhong is a giant of a construction and equipment company in China. What do you think they’re going to do with our former Hummer division?