The Federal Reserve sparked a trend of higher interest rates for the first time since 2008 on Wednesday, December 16, 2015[i]. Since then, the Federal Discount rate has gone up by many basis points (bps) numerous times. Although this increase seemed insignificant to some, the trend should continue changing debt structures and eventually profitability margins of corporations.
Graph 1
The main change comes from an adjustment in the Weighted Average Cost of Capital (WACC) for the average corporation. Since the increase in the cost of capital is interpreted as an externality, this would create a shift in the WACC from WACC-i to WACC-ii, as shown in Graph 1.
Figure 1
Taking a closer look at the WACC, it’s clear that an increase in the cost of capital will derive from the cost of capital before taxes [Kd] found in Figure 1. Going forward, acquiring money for corporations is going to be costlier, and as a result, fewer projects should be approved since more of them will become unprofitable. The result is that companies holding heavy debt burdens or negative cash flows will find it a lot more difficult to finance their losses. It will be interesting to see how industries perform against the S&P 500 in this new world of higher interest rates. If we treat this as a cycle, it began on December 16, 2015, and will end when the next time the Federal Reserve decides to lower interest rates again.
Tax Reform:
The U.S. Tax Cuts and Jobs Act is also a significant externality affecting corporations as it could decrease the cost of borrowing after taxes as shown in Figure 2. This should have a positive impact on earnings per share (EPS). Although the cost of debt (Kd) will go up, the amount paid in corporate taxes will go down. Higher interest rates and lower corporate tax rates have happened simultaneously only a few times in recent history. Given that these developments affect corporate profitability, they should become significant factors affecting equity performance for some time to come as these forces act as significant externalities on the market.
Figure 2
Historical Outlook:
Finding time periods where the Federal Discount Rate increased as corporate tax rates decreased can give us a clue as to what might happen in the future as both of these effects become more significant. Specifically, we can look at companies that outperformed the S&P 500 during periods of higher interest rates and lower corporate tax rates.
Graph 2
Graph 2 shows three periods when the federal discount rate increased as the corporate tax rate decreased: 1964 to 1966, 1979 to 1980, and 1987 to 1990. Although these periods are in different stages of the business cycle, they can serve as proxies to see which industries will outperform the S&P500 under these new conditions. To test these three periods against the S&P 500, a paired samples t-test with a 95% significance level was performed between 49 industries and the S&P 500[ii].
Null Hypothesis:
Alternative Hypothesis:
Table 1
Net Neutrality:
From the results shown in Table 1, the telecommunications industry stands out the most due to the changes in net neutrality laws, which recently have mostly been dismantled [iii]. This should allow telecommunication companies to increase their EPS as they expand their Internet services throughout the country[iv]. Although it is uncertain whether companies such as Verizon and AT&T will be able to increase their market shares, the demand for a more extensive telecommunications infrastructure is very likely as we get closer to 5G cellular technology[v].
Graph 3
Dollar:
The decline in value of the U.S. dollar, as seen in Graph 3, is also a significant trend that affects telecommunication companies with exposure to emerging markets since the USD has been decreasing significantly for over a year and is set to keep declining in 2018[vi]. As emerging and developing currencies continue to get stronger against the USD, it should be easier for people to acquire Internet services, which should increase revenue for telecommunication companies. This is because emerging and developing market economies will be able to spend more on infrastructure and increase private consumption as their purchasing power increases.
Global Growth:
From a macroeconomic perspective, emerging and developing country growth also presents an opportunity for telecommunication companies exposed to emerging market economies. Recently, revisions were made for emerging markets and developing countries to grow to about 4.5%[vii] in 2018. The fact that emerging market indexes have increased at a faster pace relative to the S&P500 is an indication that if this trend continues, emerging markets might outperform the S&P500 again in 2018, calculated by Figure 4 and shown in Graph 4.
Figure 4
Graph 4
Ratio analysis:
A closer look at the telecommunications industry suggests that the companies best suited to take advantage of these changes in the market are companies that should not be heavily impacted by the rising cost of debt. As a result, companies with the best liquidity ratios and cash reserves within the telecommunications industry should have an advantage over others that are not as liquid or overleveraged in the next couple of years. More importantly, companies that can use their assets effectively to generate profits, should be able to continue to grow at previous rates.
Table 2
Although the companies that stand out in Table 2 are AT&T and Verizon Communications, other companies such as American Tower also hold massive amounts of free cash flow to the firm (FCFF), which puts them in a prime position to increase their market capitalization and grow in a higher interest rate environment.
American Tower:
Table 3
American Tower Corp (Ticker: AMT) is an owner, operator, and developer of multi-tenant communications real estate. The company profits from leasing space for communication sites to wireless services and wireless data providers in the U.S. and abroad. Using the basic premise that a firm’s value is the present value of its projected future cash flow, we can get an idea of the company’s fair value using multiple-price methods for valuation as shown in Table 3.
Table 4
Deconstructing the EPS of American Tower in Table 4 reveals that it’s firmly poised for growth. Although financial leverage is increasing, the total asset turnover and total profit margin are also increasing, which is a sign that it’s putting its assets to good use. This is reflected by the fact that its return on assets has increased by 20% from 2016 to 2017.
Graph 5[viii]
This growth could happen via a combination of 5G technology expansion in the U.S. and higher wireless and broadband penetration in emerging and developing countries as shown in Graph 5. Specifically, high growth will be observed in countries such as India and Nigeria, where mobile broadband penetration is still low compared to other rapidly emerging countries.
Graph 6
Externalities:
American Tower is in a rare position to profit from higher interest rates, lower corporate taxes, deregulation of the telecommunications industry in the U.S., a declining dollar, and rising global growth. If deregulation incentivizes telephone companies to upgrade their services to 5G technology, it should be easy for American Tower to increase its profit margins as it increases the number of towers leased to more companies at higher prices. Additional growth in the company’s earnings will hinge on emerging and developing country growth, which should continue in 2018 as shown in Graph 6. Given the current economic externalities and emerging and developing country growth trends, American Tower is a company that might merit a closer look for some investors.
References:
[i] https://www.federalreserve.gov/monetarypolicy/fomcpresconf20151216.htm
[ii] http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html
[iii] https://www.nytimes.com/2017/12/14/technology/net-neutrality-repeal-vote.html
[iv] https://www.nytimes.com/2017/11/21/technology/fcc-net-neutrality.html
[v] https://blogs.scientificamerican.com/observations/the-downside-of-net-neutrality/
[vi] https://qz.com/1164158/the-us-dollar-just-had-its-worst-year-in-more-than-a-decade-and-2018-will-bring-more-of-the-same/
[vii] http://www.worldbank.org/en/news/press-release/2018/01/09/global-economy-to-edge-up-to-3-1-percent-in-2018-but-future-potential-growth-a-concern
[viii] http://www.americantower.com/Assets/uploads/files/PDFs/vendor-relations/investor-relations/2016/AMT%20International%20Overview.pdf
Itzel Juarez
The article is very illustrative of the way that explains the externalities and global growth. It talks about the changes that the Federal Reserve has done to the WACC and its effect on the tax reforms and interest rates. The market as a whole and the government intend to change whatever is needed to do in order to avoid collisions and financial losses to the investors. In addition, the article also talks about tax reforms and the impact caused to organizations and corporations that might affect them to their growth and profitability on business. Within the externalities, one also finds the Federal Discount Rate which it doesn’t just affect the investors but the consumers as well. The FDR is analyzed over the years to see the variations on periods and its relation with the tax rate. How Telecommunications industries have a big impact on markets was new to me. They are one of the keys to jump to the market and make the assets and profit to grow at certain rates and to increase the market capitalization. Telecommunications are growing so fast and expanding that even net neutrality might take place for them. American Tower, AT&T, T-Mobile all of them are growing not only in the market as an industry but being part of the developing and economic growth of the country itself.
Carlos A. Juarez
The federal reserve is the central banking system of the US that supply money and credit and perform key roles in the economy of the country. This article mentioned important information about how this system affected different corporations thanks to the changed it made in 2015 with the sudden increase of interest rates. Many people think that this change is not that serious. However, based on the explanation given in this article, it clearly is a problem. Changing the interest rates not only affect the debt structures and the profit margins of several corporations and markets, but the WACC( Weighted Average Cost of Capital) is involved as well. By increasing the interest rates, the chain of effects starts: corporations acquire money, therefore, fewer projects are made, no profits could be presented, debt occurs, negative cash flows are involved, and so on. All of this caused by the federal reserve. Graphs, as usual, are going to be involved. They can show us how the federal discount rate increases and the corporate tax rate decreases throughout the time, but it can show information about the effects of this changes in interest rates. Similarly, the writer explains how some companies, such as telecommunications and other technological ones generate revenue because of how their products are being consumed in big quantities by American society. However, the article shows that the negative effect on the US dollar affects some corporations. But, it doesn’t mean that telecommunications companies are being truly affected. This said because since they are international, other markets and currencies are going to help them to generate more and more revenue regardless of the increase or decrease of interest rates by the federal reserve. Very helpful information!
While american tower is in a prime opportunity to make a substantial profit, emerging markets can often be plagued by corrupt or inept government leading to higher levels of risk. Over the long run, risk can be substantially limited when investing in emerging markets by making short term trades during market over corrections such as seen in the value of Turkeys currency fluctuations do to the recent american trade war allowing to make relative profitable short term trades. While the country government itself can be a risk, there are other factors depending in the area that would make telecoms in certain areas extremely undesirable. For example if an extremest group or civil war breaks out from a poorly held government the value of your investment could fall extremely quickly. The long term investments can be made safely when the specific market itself stabilizes, but the window to make substantial profits would be tighter.
Tl;DR. short term trades in emerging markets would be the way to go in my opinion due to instability.
Jasmine Marks
From this article I was reminded of how very impactful the Federal Reserve is. This article illustrates that higher interest rates combined with lower corporate taxes will be both harmful and beneficial. This change favors bigger corporations that will gain a lot of profit in the long run. Cuts in corporate taxes have created more jobs which has put more money in circulation as a result. Smaller businesses will have a harder time competing with bigger corporations. This article particularly focused on telecommunication industries and the repeal of net neutrality. Before reading this article, I’d never even heard of American Tower, so it’s amazing to me to think that somewhere down the line, they could come out on top over well-known and popular corporations like AT&T and Verizon. I’m very interested in seeing how things will play out with the loss of net neutrality and whether it will be permanent. From an economic standpoint, it seems to be a good thing on the whole, but there’s been a lot of discussion and controversy about whether or not that’s true.
Reading this article gave me a good insight on how externalities and global growth and how it works. This article was surprising because I didn’t know that telecommunications had such an impact on the global market and that are continuing to expand greatly and how even net neutrality might even take place for them which will benefit them even more. This article also had information showed how the Federal Reserve is the central banking system of the unit3ed states and that it performs many roles in this society and country. For example I didn’t know that there was a sudden increase on interest in 2005 and that many people ignored this or did not think that it was that big of an issue, however from reading this article it can be said that by changing interest rates it manages to affect the debt, the profits of major companies and it also affects our markets. This article has shown me that there is nalo a domino effect when interest rates increase and this all caused by the Federal Reserve.
This article is very well elaborated and the illustrations make it easy to understand how global growth functions. In my opinion I had a broad new understanding of how The Federal Reserve has been made changes to the WACC and the further effect of tax reforms. The sudden changes occurring during 2015 are of big importance to our economy and a lot of people do not take that into account. I could also more specifically see the resource of net neutrality in the graphs added and how the example of telecommunication resources have allowed an increase in Internet services throughout the country from the EPS. Which is of interest to me because it will make telecommunication faster and an expansion to even 5G. I learned that telephone companies like AT&T, provide the necessary resources to have a lot of profit while leaving the other small companies behind. Big corporations cut taxes and create more jobs and but more money in the economy to become a circulation. I really liked the comparison between the countries in the International Markets Poisoned for Smartphones, because it shows you how much more advance the U.S. is compared to other counties like Argentina which struggle to even get proper cell signal, and how much that is of advantage to our economy.
This article illustrates exactly how powerful the federal reserve is in todays economy . This article shows what higher interest rates combined with lower corporate taxes will be good and bad to business’s. This change benefits bigger corporations that should gain a lot more profit in the long run. since corporate taxes were cut significantly corporate business’s are now able to hire more people at their companies thus bringing more money into circulation of the economy. but smaller business may have a harder time with these changes because people would rather work for a bigger corporation and also customers would most likely go with a company like Verizon over a smaller company because of the coverage ratings and such. personally the thought of net neutrally is unfair for the smaller companies in a way because they will be pushed out of business by at&t or Verizon because the smaller companies don’t have the coverage that everyone wants. so a question that arises from this is that if two or three companies were to dominate an entire industry such as at&t and Verizon would that be considered a monopoly.
This article is informative on how the U.S. Federal reserve can effect not only the American economy, but the world. The graphs and visuals in this article demonstrate how the effects of higher interest rates and lower corporate taxes will change the economy. With this happening only a few times in the economy, we can expect some damage, their will be higher debt within corporations, and also a decrease in output. It would also have a big effect on small business owners because they would be forced to pay more money in taxes instead of the larger corporations. I did not know that the US dollar was on a decline in value over the last couple of years. It is interesting that you brought up the competition between online currencies that could also give telecommunication companies more profit. There is no doubt that with these changes in the economy recently, that monopolies could grow even larger.
In reviewing the topic/discussion of “Externalities and Global Growth” I personally believe that all of these externalities effect global growth but it often hard, if not impossible to record or document. All we see as people watching these markets rarely take into account what happened prior to any shift or movement. However, I want to focus on the corporate tax rates in this topic to give my viewpoint. In an effort to offset interest rates on the rise, corporations I believe should be given lower tax rates. Why? I believe in the the trickle down economics perspective which starts with lowering corporate tax rates which will end up in the hands of common citizens though taxes and cheaper goods. What this article points out is that due to so many outside forces(externalities) it would a positive change as a capitalist nation to give coperations a larger tax break or tax them less to adjust after interest rates stop increasing.
– Drew Haddock
Jess Achivida
The article was enlightening in terms of explaining the how a domestic event, such as the trend of increasing interest rates by the Federal Reserve, could trigger overall global growth. Although I don’t entirely understand the complications of WACC, it is intuitive that the cost of capital will increase with the increasing interest rates. I also find it interesting that telecommunication companies will most likely be the industry to profit from this, especially with the concern that everyone has with net neutrality. However, I understand that it will probably be the best for everyone, because it should be easier for people to acquire Internet with the increase in infrastructure. This would also result in a wider spread of telecommunication services for people in developing countries that most likely do not currently have those services available. However, it may also be an issue if big telecommunication companies such as AT&T and Verizon are virtually the only companies that will be able to grow from these changes.
This article informs us on how the U.S. Federal reserve can have a global impact. I enjoyed the visual representation offered by the graphs that show the effects of higher interest rates and lower corporate taxes will change the economy. The effects that can be expected are higher debt within corporations, and a decrease in output. It would also have a big impact on small business owners because they would be forced to pay more money in taxes. I did not know that the US dollar has began to lose its value over the years. There is no surprise that online currencies that could also give telecommunication companies more profit. With these changes in the economy recently, monopolies could grow even larger in the environment.
Bre-Ashley Levy — Reposting my response with my correct name
This article informs us on how the U.S. Federal reserve can have a global impact. I enjoyed the visual representation offered by the graphs that show the effects of higher interest rates and lower corporate taxes will change the economy. The effects that can be expected are higher debt within corporations, and a decrease in output. It would also have a big impact on small business owners because they would be forced to pay more money in taxes. I did not know that the US dollar has began to lose its value over the years. There is no surprise that online currencies that could also give telecommunication companies more profit. With these changes in the economy recently, monopolies could grow even greater in the environment.
This article exposes to me at how great of an advantage some telecommunication companies are in due to deregulation on things such as net neutrality. I’m very interested to see how these companies capitalize on this opportunity. Even though this is not a popular choice to the public internet users, with other factors included, such as the rising global growth and 5G technology services soon being the next step, its interesting to know that companies like Verizon are the ones benefiting and able to highly increase their profit margins. Personally i was seeing a lot of unease from people about possible loss of net neutrality, but then again we could make the point that a lot of people speak before doing research and are also automatically apposed to things that don’t directly benefit them. overall, i feel as if many people were just panicking and expecting the worst, but the loss of net neutrality could do great things for the economy.
I think it would be a smart move for a company, such as American Tower, to bring business into developing countries. Not only would it be beneficial to the company, but also to the country because it would bring technology advances. With a growing successful company coming into a developing country there would most likely be less unemployment in the country since workers would be needed to build new infrastructures for the company to continue growing in that area. Overall, this would aid in boosting the country’s economy and developing a stronger workforce. If someone was to invest there USD in the company, I believe they would also be able to gain since the currency in emerging countries is rising stronger. This is because the company has already shown to be consistent in growth and the money has more opportunity to grow a country with a stronger currency.
The WACC has quite an impact on smaller telecommunication corporations, especially when it comes to finding the money for projects, and when corporations cannot find the funds then they fall into debt and lose profits. Similarly, taxes and the cost of debt can fluctuate ever so often that it may, again, affect the profits of these corporations. In today’s economy, it seems as though smaller corporations are really struggling to make the profits in order to stay in the everyday competition against larger corporations receiving the big funds for a project. However, the Net Neutrality helps to encourage those smaller companies, as well as those larger companies, to take control of their pricing and promoting their business; which in turn encourages the competition of those other companies. Although our U.S. dollar is decreasing in value, there have been alternative, promising currencies growing, and with that more people may be able to afford such resources that benefit telecommunication companies. In conclusion, there are roadblocks for these telecommunication companies that have major effects on their profits, but at the same time our economy is learning and growing that can benefit these companies.
This article explains some very interesting theories. in 2015, the Federal reserve “sparked a trend of higher interest rates”, which then affected the WACC. This is a major deal because in return if affects profitability margins and debt structures for corporations. Another item discussed is the tax reform, which the article mentions how it could lower the cost of borrowing and also should have a positive impact on earning per share. It also mentions that only a few times in history has interest rates been high along with low corporate tax rates, which in return should make for positive profitability.
One part of this article that caught my eye was the graph showing international markets poised for smartphone growth. Only two countries were considered “advanced” in Germany and the U.S. India also caught my eye, showing the largest bubble for “emerging”.
I found the information very intuitive and informative on what is happening to economy and how different things are affecting different industries. The blog really caught my interest as I currently work for ATT and have some stock in the company as well. With new 5G technology right around the country, it is being tested around the U.S. now, I must agree that American Tower is a company that is poised to take advantage of the numerous factors. With the company leasing space to numerous providers instead of restricting themselves to only one, they set themselves up well for what may come in the future with mobile devices. Technology is only going to keep growing and looking into investing in American Tower would be a smart move. After all, the American consumers consumption of data has been trending up for years with no real end in sight. I enjoyed reading the blog and makes me think about other companies that are in my current industry.
The article was extremely helpful in easily explaining the global growth triggered by Telecommunication. The impressive improvement in technology makes it no surprise to me its effect on the global market. America’s innovation and presence is very advantageous when it comes to technology. Since the value of the dollar is decreasing, it makes me wonder whether technology will evolve to the point that all money worldwide will be replaced with cryptocurrency like bitcoin. Additionally, it shows the extensive reach of the Federal Reserve system It shows how high-interest rates will allowing large companies to continue to expand; however, small companies will not be able to compete and they would fail. It allows large companies to circulate more money by cutting taxes and adding more jobs. It doesn’t create a monopoly, but it is quite close. The only corporations left in business are the superpowers, like AT&T and Version.
I found the article very insightful as to the workings of the global economy. I found most intriguing the graph of the WACC increasing in the United States relative to other countries. I think this will become an increasing more important issue not only as it pertains to economic growth in the United States bu throughout the world as well. As it becomes more expensive to finance and acquire debt to further growth for corporations in the United States, countries will move outside the US to finance and grow. This is important because with companies expanding outside the US we will need to compensate in other ways to maintain a positive GDP growth and keep companies trying to invest in the United States. This will be tough considering emerging and newly industrialized nations like India and China grabbing the attention of big companies given their WACC is presumably lower than that of those looking to invest in the United States. – Mitchell McGurrin
Growing up I would hear my mother say that her Director of Sales at Houston Cellular stated, “Someday everyone would own a mobile phone.” This was back in 1994. Fast forward 24 years and his prediction was spot-on. Houston Cellular was formed in 1983 and through a series of acquisitions and mergers became BellSouth and AT&T Wireless. Today the service is now branded “Wireless from AT&T, formerly Cingular Wireless”, “Wireless from AT&T” or sometimes simply “AT&T”. The above-mentioned content demonstrates the momentum in telecommunications. Based on information in the article, the growth potential in telecommunications is boundless due to a boost to 5G technology and other technological advances in untapped countries such as India and Nigeria. Critical mass has yet be reached in these countries for example; however, the potential for growth is extremely high. The mere fact that the Federal Reserve has the muscle to raise or lower rates that affects the effects of our world creates panic considering this trend can potentially cause companies to raise prices when unnecessary because they are reacting to a change in their profit margin. As mentioned in the article, with a shift in the WACC companies may become apprehensive coupled with precautionary measures, including downsizing, reduced wages and immobility.
This Article is very informative in many ways. One of the points that I found extremely important is technology. Each and everyday technology keeps on advancing little by little. Telecommunications keeps growing and 5G cellular phones will be used more and more as time goes by. As stated in the article, this year the USD has lost a lot of value and it making things complicated because it slows the process down. There are many other countries that are taking advantage and they are becoming more powerful. The United States needs to be able to work with other countries in order to be able to figure this situation out. Once the USD rises I feel like it will make things easier and everything will flow smoothly. America has a high demand for high technology and this shouldn’t be an issue and I feel like one way or another it will be figured out.
Araceli Hernandez
The heavy influence that WACC has on less known telecommunication companies could cause a bump in the road for the telecommunication industry. However, the article sheds light and gives the reader a clear understanding of how global growth works. To my surprise, the Federal Reserve also plays a huge part in overseeing what happens, with their changes in WACC. I was intrigued by the technology we use here in America, smartphones are a huge part of America’s economy and how we use it as a tool to expand our growth. This article also opened my eyes to the domino effect theory, when something tumbles no matter what it is. When huge companies start taxing more for cell phones or services it also affects the company’s outcome. The company might suffer from a slight delay in their income causing that domino effect. Everything has an effect especially when it comes to the economy. – Araceli Hernandez
This article proved to be incredibly interesting to read, particularly its analysis of the telecommunications industry in America and this sector’s future growth. Having read the provided information, I wonder if now would be a good time to invest in these corporations if their revenues are likely to increase as a result of current economic conditions in America. Moreover, it was quite intriguing to see how the actions of the Federal Reserve (raising interest rates) coupled with lower corporate taxes can have a domino effect at the international level by prompting firms to consider investing abroad. As developing countries, including India and Mexico, continue to advance in their goal to become fully industrialized nations, will US corporations profit off of this economic development? In addition to these questions, it was also interesting to read how the author explains that even though large corporations will have less money to invest in projects (unless they have liquidity and/or have a large among of free cash), their EPS may increase as a result of corporate tax cuts. From this same idea, the writer moves on to highlight that the combination of spikes in interest rates and lower corporate taxes have only occurred three times in the history of the US, which gives an insight into what is likely to happen in this nation’s economy over the next few years. Lastly, it was surprising to read how the US Dollar has decreased in value over 11% in the last few months, something that few people speak about. Overall, this article presented a comprehensive, yet easily understandable analysis of how several economic externalities are affecting global economic growth.
This article was very informative and really explained the global economy and how it functions. It really proved how important the Federal Reserve is to the economy. The Federal Reserve sparked up trend higher interest rates for the first time since 2008. Ever since than the Federal Discount rate has increased by many basis points many times. The trend should keep changing debt structures. Also the improvement in technology has been a huge part for the US success and will only continue to grow, the amount of technology we have today is insane.
The most interesting part of the article was the section about the telecommunications companies and why the top firms are doing so well. The companies with the highest amounts of liquidity are doing the best and will continue to grow with the economy. The amount of cash a company has will dictate how much they can grow and invest their earnings. The best way for communications companies to grow is to expand into other countries. Developing countries especially should be targets for expansion as the first company to establish a market there will most likely grow the most in that country. Expanding companies is becoming easier with new technology, and will continue to provide opportunities for others to enter the market too.
This article is very informative, and brings some very big issues to light. In 2015, USA raised its interest rates which can make it a lot more difficult for companies to turn profit with the S&P500. Right now the technology field is expanding rapidly, and more countries are getting involved and catching up to america in tech. With the increased interest rates, and sudden growth of other countries, manufacturers may be more inclined to outsource their production to areas that they can save money so that the interest rates in our home country are a lot less detrimental to our end profits.
It was very interesting to read and see the graphs that represented the effects of the tax reforms. I have been interning at CPA firms and have began to learn how different tax regulations affect our clients taxable income, and I knew that with this new 2018 reform there are some key changes that will definitely impact clients taxable income in different ways. It’s also interesting to see the actual relationship between the U.S. dollar to other developing economies. I’ve traveled to Mexico for most of my life and have always known to make some sort of conversion from Mexican pesos to American dollars but never understood why or the logic behind it until I got older.
Well it certainly was interesting. It took me several times to read it though because it was surprisingly dense and I am incredibly tired. The article does a good job of showing how there are man factors that can influence an industry. For example, the Government, public interest, technology or competitors.
This was a really interesting article to read, and it has helped me learn things that I didn’t even know about. I learned that increasing interest rates could be harmful and beneficial to our economy. It’s not a surprise that tax cuts have resulted in more jobs, this is very beneficial to our economy because it lowers our unemployment rates. Telecommunications are extremely important and I learned about net neutrality. The major service providers today are AT&T, T-Mobile and Verizon. When learning about the American Tower, I was amazed that there is possibility that they will be changing the game. The article is very factual and although it is opinion based, I agree with the views that were presented.
Jonathan Luu
I thought that the article was a great way to show me the benefits of telecommunication companies with things such as net neutrality. Telecommunication is fairly important in today’s society due to how everyone in the modern day world uses some sort of social media or technology that requires a communication to keep in touch with each other. It was interesting to learn that the business’ debt was indirectly correlated to the interest rates where when the interest rates would increase, the taxes were lowered and vice versa. This situation specifically allows for the larger corporations to succeed compared to the smaller companies due to how the larger companies have a significantly larger flow of income compared to smaller companies.
This article touches on a lot of things, especially the federal reserve. The visual representation of the global affect the federal reserve has is outstanding. I have heard about the net neutrality aspect, and I think it is unfair. I do not think telephone companies should be able to charge for social media apps. We don’t want service with them to have social media apps. We want their cellular service and to be able to have a phone. Telecommunication companies are some of the largest corporations and make billions of dollars daily. I learned what the WACC is and it a very complex equation but, broken down precisely. Lastly, over the years I have personally seen the dollar decrease in its value. I used to be able to buy candy, makeup, and just the little things for nearly half their price now. Due to inflation, the more the government or the federal reserve raises taxes, the less of the value the dollar is going to be.
It seems that one of the best bets for investors to make to invest in a company that’s poised to take the best advantage of the forthcoming political and economic position, and this article made a strong case for AMT as that company with the deregulation of the communications industry that will increase demand for its product in the U.S. and rising global markets without much communication infrastructure will increase demand for its product overseas. However, just because a company is poised to experience growth doesn’t necessarily mean that they will, as many other factors can influence a company’s success. The deregulation of the communication industry reminded me of a story that I had read regarding Sinclair Broadcasting, a company that owns local news stations famous for having a heavy influence over its stations’ programming, and its planned merger with Tribune Broadcasting. The merger was occurring when communications policy was incredibly business-friendly, arguably more so than any time in recent memory, and it was regarded as a safe bet. However, Sinclair pushed the envelope too much, refused to abide by the rules that existed that would’ve required them to sell off a few stations, and did not respond to the FCC’s problems, and the deal was effectively killed. So even though this seemed like a good investment, company attitudes and actions need to be examined as well to ensure that the company is willing and able to take advantage of a favorable position.
This article begins with an observation of the Federal Reserve’s recent interest rate increase. To understand why this is extremely relevant to the economy, markets and government, the reader must first understand what the Federal Reserve (FD) is and its responsibilities. The FD is the United States central bank that regulates the flow of money and credit for the entire country. When the FD’s interest rate decreases or increases, combined with corporate taxes, the impact is shown through trends evident in small and big corporations.
I had some previous knowledge of how telecommunications effects the global world and issues like net neutrality after talking to a former US government anti-trust lawyer this past semester. She explained to me about how one of her major cases was from a couple years ago when her team made sure AT&T didn’t buy T-Mobile and how it would effect consumers in multiple countries. From that conversation I was able to gleam how impactful telecommunications can be for the economies of the world.
While this article is illuminated with information that would be important and very useful to many, it is heavy on the business language. While I had to read it twice just to fully grasp what I was reading I do believe the information is interesting as it shows the breakdown of economic understanding and business decisions that are swayed by a single event. More so I am frustrated with how corporations are able to take advantage of each situation just to push them in a better standing. I understand that this is capitalism but the declining dollar value is something that effects millions negatively world wide. Set aside the formulas and large vocabulary at times this is basically common sense. More often than not companies with more liquid able assets tend to do better as they are able to cope with change easier and can move money more effectively. It is interesting to see how interest rates can have such a domino effect on companies especially in times when tax rates do not drop to help alleviate the profit loss. As for the telecommunication aspect this again is more common sense as we drive society into the future we need equipment and providers to assist. Where there is a will there massive amounts of money to be made. -David Ritchey Macro Econ 2301- Prof. Timana
I thought this article was very informative with the graphs and examples used. For someone like me who is not entirely understanding of a lot of economic terms it was a little hard for everything to completely register for me, none-the-less I was still able to comprehend everything. It was interesting to learn about how the Federal Reserve has a large effect radius over economics. It is also interesting to see how companies are so bent on seeing smartphone growth, which is something I was not aware of. The dollar value portion was very true and relatable as I myself have seen the decrease in the value of dollars, which can be sad because you kind of are left with the idea that one day your work may never be enough for paying rent or buying groceries, which can be a very scary thought, but as time goes on there will be big influxes of money growth, which will keep those scary ideas away. I still think the article was nice and clear about their topics.I hope to learn more about these topics in the future.
Samuel T. Middlebrooks
This article was well done.
Although low interest loans can potentially give corporations significantly more capital to attempt to expand, I think the model of having a lowered corporate tax and higher interest on loans has its positive attributes. Low interest rates could potentially encourage many companies to allow their business to rack up a much larger amount of debt that they can’t reasonably pay back. Sure, when the economy is doing well, low interest debt almost seems like free money. However, its terrifying to think of a significant portion of corporations that create so many jobs defaulting on their loans during an economic melt down similar to the 2008 housing bubble.
Sorry, I’m amending what I already stated
Although low interest loans can potentially give corporations significantly more capital to attempt to expand, I think the model of having a lowered corporate tax and higher interest on loans has its positive attributes. Low interest rates could potentially encourage many companies to allow their business to rack up a much larger amount of debt that they can’t reasonably pay back. Sure, when the economy is doing well, low interest debt almost seems like free money. However, its terrifying to think of a significant portion of corporations that create so many jobs defaulting on their loans during an economic melt down similar to the 2008 housing bubble.
Higher interest rates are unfortunately inevitable. However, high corporate taxes directly punish financial success while regulation can potentially get in the way of innovation. If we were able to promote economic expansion through deregulation and lower taxes, our economy might actually be more stable due to minimized risk of debt default on a large scale.
This article was very interesting. At first I had a hard time understanding what exactly it meant since I came to this article with little prior knowledge, but the graphs and illustrations made it a lot easier to understand. I was not aware that the federal reserve was able to lower and raise interest rates, I guess mainly because I hadn’t ever thought about it. It’s very interesting how much raising interest rates can change an entire industry and make it impossible to start new projects or even carry out the ones that have already been started.
In the ‘Historical Outlook’ section of the article it stated something to the effect that history repeats itself and we are able to see what will happen in the future based on what has already happened in the past. In the past we have seen time periods where the Federal Discount Rate increased and by looking further into that we are able to see what could possibly happen in the future.
Overall this article was very well written and I enjoyed reading it and learning more about Global Growth.
This article was very well thought out, very informative in a way where it is challenging to read because of terms i don’t quite understand yet as well as formulas. The article helped open my eyes to what has gone on in times past where the economy has had its downfalls leaving people nervous about their money if they own stock in some major corporation. And as a future investor in mutual funds and stocks i am going to need that crucial information when the time comes to when i need to make a decision on what to do. One thing that i thought was very interesting is the increase in global growth in developing countries say like India, where the telecommunication growth is not as developed as it is here in The U.S. So it is interesting to see numbers that can p that telecommunications as well as many other services spreading to different parts of the world where it is hard to get them. Leading to the increase to their overall economy in the long run.
This article was very interesting, at first I don’t really understand was is economic is and why is important that we have to take this class. went I read through it have me reset of my mind that is base on money that we have used in everyday life, many businesses have gone and many people gave lose their jobs. went the money have downfalls and make people be scars of losing their money and also their jobs. Since I read through the article it makes me be more understandable, how to make business is just the step that makes know, how to get through the bad economy that came to the thing. And I was so interesting that hoe people increase to their economy in the long run.
The article is pretty interesting and well thought out, but it lacks a more in depth look as to why this events are happening. For example the Fed is raising “interest rates for the first time since 2008 on Wednesday, December 16, 2015” for a reader that has a good under standing about how the economy works. This article is completely fine but for the other reader that has no understanding on how the economy works would like to know why the Fed is raising interest rates, even if its just a brief summary as to what prompts the Fed to raise interest rates (ie: to control inflation, stimulate the economy for growth or to suppress the economy from growing to fast).This would make the reader understand more on what the article is trying to say.
The examples that the article provides are pretty good since it covers a little bit of everything from interest rates all the way as to how a company would position its self to capitalize on a new market so it would get an advantage over its competitors.
Carrie Everitt
This article discusses a few interesting points on what is going on in the market out there. You can see where the decline of the dollar is making certain companies look at how they can benefit from this. The telecommunications industry is making changes to their market to benefit their companies. They do this, so their companies will not be impacted from the rising debts. You can tell by the research that companies who hold massive amounts of c ash flow tend to benefit better and faster then other companies such as At&T and Verizon. Companies like American Tower tend to benefit the most from all of this because they lease their space to communication sites by doing this the company ensures that they will stay stable while other companies struggle. They have upgraded their product forcing other companies to use their product or the companies have to use their money to stay up with the 5G market.
For someone like me who understands very little about how the economy is affected by external causes I found this article helpful and interesting. I didn’t really realize how much the Federal Reserve affects so many big businesses or industries with the increase or decrease of interest rates. I would find it helpful to know why the Federal Reserve hiked the interest rates for the first time in December 2015 since 2008. In 2008 we had the housing market crisis and the economy went into a tail spin so that could be a possibility why the Federal Reserve had not increased interest rates in seven years. Since the statistics in this article are from 2015 with predictions for 2018 I would like to know how big corporations have done with the higher interest rates and lower tax rates. Did it affect the ability to take on more corporate projects? The points about telecommunication was also very interesting and it would be interesting to see how that industry has grown in other countries like Nigeria and India mentioned in the article. Also how does the Bitcoin play into all of this as it a growing currency and more and more people are investing into Bitcoin?
For someone like me, like Tammy above, who doesn’t know much or read deep into externalities and global growth, I found this very helpful from thorough explanation and proof of these situations to comprehend. I found that the declination in the value of the U.S dollar was really interesting because I have heard that in general, over the years, the U.S. dollar has become less valuable. This is because of inflation, each dollar buys less, making the prices of imported goods rise. In other words, as the dollar’s value falls, the cost of living rises. However, I came to realize that it not only has just declined in value, but it continues to rise and fall constantly due to exchange rates, treasury notes, and foreign exchange reserves. After all, reading this blog made me realize that there are a ton of economics we overlook in our economy and how it is best to keep our eyes open to important information as it all connects to our everyday living.
This article was very informative. I am not a person who knows a whole lot about economics or how it works. The tables and graphs are very helpful to follow along with what is going on in the article. Adding the formulas to the article was good. This way the reader can see exactly what is going on. I really had no idea how good American Tower was doing, I actually didn’t know much on this subject. However it is not surprising how telecommunications is growing rapidly. It really seems like American Tower will be doing very well since it is steadily increasing profits.
Reading this post made me question the premeditated planning behind the Federal Reserve’s raising of interest rates. Perhaps some well-informed individuals at the Federal Reserve knew that the deregulating of net neutrality laws would provide a window for telecommunication companies to secure economic gains. The falling value of the U.S. dollar would allow for other developing countries to claim a foothold in the telecommunication business while simultaneously bolstering U.S. businesses like American Tower Corp. I believe that this would ultimately expand the overall usage of telecommunications abroad and prove to be beneficial for the U.S. dollar in the long run. One has to wonder what kind of economy will emerge in the future if telecommunication businesses like American Tower Corp and AT&T yield massive profit from these raised interest rates. With 5G technology just around the corner, I believe that it is safe to place bets on telecommunications as a whole in the coming years. 5G capability will only expand wireless communication networks, an already growing industry, both domestically and abroad.
Olivia LeBlanc
I found this article to be really interesting, and the graphs were incredibly helpful. I found it rather strange that the interest rates are continuing to rise, especially when given the information about previous time periods in which interest rates rose. It seems as if the 2015-2018 time period is one of the longest time periods recorded in which interest rates have continuously risen. I found it rather unfair how it seems as though the companies who are most benefiting from this instance are the large corporations, and in contrast the rising interest rates are actually hurting small business owners. It also seems rather ironic that people who live in countries with a developing economy will benefit most from putting their money towards huge telecommunication corporations that they may not even be able to personally access . Also, the fact that the value of the U.S dollar is decreasing is not a good sign for small business owners as well, as it means that investors in other countries will use their money on large corporations. America is known as the land of opportunity, and it makes me rather upset to learn that in actuality, large corporations are benefiting from the economy and not small businesses. I had no idea that this was the case and the article really deepened my understanding of how the economy effects businesses specifically.
I found the article very informing and it made it easier to understand the functioning of global growth I believe that all of these externalities have an effect on the global growth, but is very hard to document it. All we can see is people watching the markets, and they rarely think about what happened before any shift or movement. I learned that the US dollar is on a decline in the value over the last couple of years. Although the U.S. dollar is depreciating in value, there are still promising currencies growing. I found it interesting that the competition between online currencies could give telecommunication companies more profit also. With this being said, more people may be able to afford resources that could benefit telecommunication companies. In conclusion, there are obstacles for these telecommunication companies that cause effects on their profits. Although, our economy is learning and growing so we can benefit these companies.
Externalities and Global Growth was a very interesting article. I got to learn about different things that I never payed too much attention too or learned about before. From reading it I now understand that the telecommunications industry is at a spike and is going up quickly. The interest has been increasing while the US dollar seems to be decreasing. It seems like they will have some major success in gaining profit compared to their competition. What I got from this article is that as of right now the internet has become the number one industry because everyone now in days has social media or if they need to log on to Google to find something they have access to it right there one their phone. I also believe now is a good time to invest in telecommunication towers.
After reading this article i have learned a lot information about tax reform and telecommunications. Tax reform is the process of changing the way taxes are collected or managed by the government and is usually undertaken to improve tax administration. According to the article it explains how the US tax cuts and jobs act is affecting corporations as it could decrease the cost of borrowing after taxes. I can honestly say after learning more about telecommunications it was pretty impressive how important telecommunications takes part for the global market. In this article it let us know how the US dollar can affect some companies in a negative way, but that doesn’t necessarily mean anything bad. For example we have AT&T, T-Mobile, and The american tower as a perfect example how all this telecommunication companies are successfully growing and will continue to grow. For me The American Tower Corp is one of the smartest companies ever, since they are a developer of multi-tenant communications real estate that profits from leasing space for communication sites to wireless services and wireless data providers in the US. Regardless if the telecommunication companies increases or decreases they will still play a big part in the world.
The federal reserve is the center of American money and the economy. They are the ones who (even though I shouldn’t say it) manipulate the economy from inflation in the economy to deflation. The reason they can do that is by changing interest rates which affect banks. Companies, and consumers which is a chain reaction from the fed onwards. The reason this can be a good and bad thing not taking into account what type of business it is would be liquid assets like the saying “cash is king” really come into importance because the interest rate has increased from the federal reserve so loans have a higher interest rate to acquire money than before. The money in liquidity would give a safe area to where projects and innovation in those businesses can happen, but for those who have all their money tied into assets will be locked down as people are having to cut costs because of the profit margin getting smaller due to costs increasing. In a way, this is being done for a good reason to prevent America from having another financial crisis or at least ritard the time until a crisis. I believe this is good and that the economists’ who cumulatively chose this plan are playing it safe to help save the economy from a downturn.