What's Important in the Financial World (3/7/2012) Nintendo Sales, China Trade

Oil traders are skittish. A little bit of news about crude supply or demand can trigger a frenzy of trades. That happened again as China said it will increase energy imports this year. It is impossible to couple that with what will happen in Iran, the Strait of Hormuz, of even Saudi Arabia. Nevertheless, Brent crude prices rose $0.84 to $122.82. Another modest piece of news could send the price rocketing higher, or nearly collapsing. Oil trades have shown that analysis to be true.

Greek Debt Problem

The saga of the Greek debt problem still is not over. Many private bond holders may not agree to trade their current sovereign holdings for paper worth about 70% less. The lack of a deal could by itself apparently undo all of the effort by Greece’s neighbors, the European Union and, indirectly, the European Central Bank to fashion a bailout. Seventy-five percent of the private holders have to agree to the new terms. The acceptance rate could still be short of that. It is hard to see what holdouts would gain. If Greece defaults entirely, the value of their paper could go to zero.

China Trade

The U.S. House of Representatives approved a bill affirming the ability of the Commerce Department to set higher duties on goods from China and other nations that subsidize exports. The Senate has already approved similar legislation. The bill will go to the president shortly, and he is likely to sign it. The Chinese claim that the action is a barrier to free trade. But the problems addressed by the legislation have existed for a number of years. There have been accusations, many of them confirmed, that China sends cheap goods to the U.S. to gain market share. That, some economists argue, destroys U.S. manufacturing jobs. With the national elections only eight months away, very few candidates will stand up for China at a time when many Americans believe that the People’s Republic’s actions have cost the U.S. tens of thousands of jobs.

Nintendo Sales

Nintendo, once the leader in global video game sales, lost its first place as the Wii aged and was overtaken in most regions by the Sony (NYSE: SNE) PS3 and Microsoft (NASDAQ: MSFT) Xbox 360. Nintendo has moved back into a strong position in the U.S. video game market. The Japanese company said it has sold 4.5 million of its new DS3 product in America since it was launched. Nintendo has released several games for the console that have increased demand as well. But Nintendo almost certainly will face sales pressure as the end of the year approaches and holiday sales become critical to each of the three console companies. Microsoft and Sony have dropped prices on their products before as they tried to elbow Nintendo out of the market. The price of the DS3 will drop as it attempts to match the price points of its competitors. And, with that, margins will fall.

Douglas A. McIntyre