Recapping the day's news and newsmakers through the lens of CNBC.
America's Top States for Business Revealed!
Is your company thinking of expanding or looking to set up a new subsidiary in a business friendly state? Do you know which U.S. states are the friendliest to companies, based on cost of doing business; quality of life; access to capital, education, technology and innovation; and other key factors? CNBC has the answers for you in America's Top States for Business 2013, revealed today.
Counting down from No. 5 to No. 2, the Top States for Business 2013 are Virginia and Utah (tied at No. 5—a Top States first); Nebraska at No. 4—its first appearance among the Top Five; shale oil juggernaut North Dakota at No. 3; and Texas at No. 2—the Lone Star State has always finished No. 1 or No. 2 in the seven years that CNBC has been doing Top States for Business.
And with a record tally, besting all states since CNBC began tracking the data in 2007, with 1,639 out of a possible 2,500 points, the Top State for Business 2013 is South Dakota.
"Building a business is tough, but I hear building a business in California is next to impossible."
—Texas Gov. Rick Perry
"Barely a fart."
—California Gov. Jerry Brown on the Silicon Valley road show just undertaken by Texas Gov. Rick Perry in an attempt to win favor with the region's start-ups
IMF Panic Buttons
If your business has been slow to ratchet up spending, hiring or acquiring given global uncertainty, the International Monetary Fund has your back. On Tuesday, the IMF downgraded its global growth outlook and highlighted three "new" risks that threaten to derail the global economic recovery.
The fund now forecasts global growth of 3.1 percent, down from the 3.3 percent growth it predicted in April. It also downgraded its 2013 outlook from 4 percent to 3.8 percent.
The three issues that have soured the IMF aren't exactly new, just newly factored into their global growth downgrade. They are:
An imbalance in China between investment and consumption
Abenomics, otherwise known as Japanese monetary policy
The end of the Federal Reserve's quantitative easing
The IMF is worried that investment may decline in China faster than consumption recovers, and that that will lead to lower growth. It also is concerned that the Japanese stimulus package remains highly risky. Finally, the end of quantitative easing could lead to "a lot of volatility."
"China has a very delicate rebalancing to do between investment and consumption, and the risk is that investment declines before consumption can really recover."
—Olivier Blanchard, IMF director of research
One CEO who isn't afraid to pull the trigger on a big deal is Kroger Chairman and CEO David Dillon. The grocery store chain announced the acquisition of Harris Teeter Supermarkets for $2.5 billion in cash Tuesday. The premium paid for the supermarket company, though, was only two percent above Monday's close. Still, Harris Teeter is being valued at 34 percent more than its Jan. 18 share price, the date on which it first announced a strategic review.
Harris Teeter has 212 stores in the Southeast and mid-Atlantic regions. Cincinnati-based Kroger operates 2,419 stores in 31 states. The deal will add three states to its retail operation. In addition to its flagship brand of supermarkets, Harris Teeter owns Ralphs, Fry's and Food 4 Less.
"This is a financially and strategically compelling transaction, and a unique opportunity for our shareholders and associates."
—Kroger Chairman and CEO David Dillon, in a statement
Facebook Graph and Your Business
If you're one of those cranky old executives who refuses to use Facebook or Twitter, get the geek you hired to handle the business aspects of those crazy social media tools to explain to you Facebook's new Graph Search feature, which has the potential to redefine how effectively the social giant can sell and target advertisements.
Graph Search makes it possible for Facebook to produce an ad category that's unique to Facebook and that allows advertisers to have a targeted entry into social interaction.
There could be a big difference between the display ads that Facebook has now and the ones that could be integrated into Graph Search.
"An individual looking at a display ad is slightly less likely to buy that product than to get struck by lightning."
— Max Wolff, chief economist and senior analyst at Greencrest Capital
"For an advertiser, that's a really big deal. It jacks up your ability to close. That's the promise of the social Web."
—Wolff, on the difference between the traditional display ad and Graph Search's potential
Stop Paying Attention to Fund Flows
For executives who have been busy trying to micromanage their 401(k) plans given the recent volatility in the equity and bond markets, give up—it's really not worth chasing the herd into panic. We assume you know better than the retail investing masses, but just in case …
Metrics showing how much cash is moving out of bonds and into stocks, or vice versa, may make for interesting dinner conversation and provide a slight peek into the mind of the retail investor, but they don't tell you much about actual price movement.
Take the record $73.1 billion that, according to market research firm TrimTabs, came out of mutual and exchange-traded bond funds in June, and the mass exodus from the funds of bond investing giant Pimco as rates have risen. In reality, the actual performance of funds on both the equity and fixed income sides has tended to have little coordination with money flows.
"Fund flows are certainly relevant, but they are only one ingredient in a big recipe, so to speak. Our take is that the investors may be overly focused on fund flows currently, and we would look to take advantage of dislocations that emerged in the wake of recent volatility."
—Citigroup analysts in a report