In The Headlines
Braveheart Revisited – Scots Vote on Independence
This week Scotland’s voters take to the polls to determine whether they want to break off from the United Kingdom. And while a vote in favor of independence from the U.K. would simply be the beginning of a long and complex process, all of a sudden, markets are paying rapt attention to the potential outcome. The upcoming vote in Scotland has led investors to sell shares of Scottish companies, place bearish bets on the British pound, and worry about the widespread implications of the potential Scotland split-off. “If you have investments in the U.K., you should be very much concerned,” said Oliver Harvey, macro-strategist at Deutsche Bank. “A ‘yes’ vote has big implications for U.K. growth and big implications for investments. And if you have assets in Scotland, all of the sudden they’re not under the same tax or regulatory regime.”
While most expect Scotland to eventually vote against independence, the polls are certainly close. A YouGov poll last weekend showed a narrow lead for independence among voters. More recent polls have shown a lead for those voting against the move. Still, the “yes” vote has been broadly gaining momentum, and many likely voters report that they are still undecided.
Meanwhile the pound has fallen dramatically against the U.S. dollar over the past two weeks, reflecting fears about what Scottish independence would mean for the British economy and currency. Scotland is a major producer of crude oil, and it remains unclear how Scotland and the remaining U.K. would divide up its energy resources. And Scotland’s currency options remain hazy and extremely complicated. In Scotland, many companies—including major banks Royal Bank of Scotland and Lloyds—have said they will move to England if Scotland votes for independence.
The ramifications of Thursday’s vote could stretch far beyond Scotland and England. Market participants have noticed a rise in Spanish government bond yields on the back of independence-friendly poll numbers. The connection here is the Spanish region of Catalonia, where a large percentage of the population has always called for independence from Spain, and a massive demonstration in favor of an independence referendum was held on Thursday.
If Scotland votes for independence, or even if the Scottish “yes” vote fails by a thin margin, the Catalonia movement may gain ground in discussions with Spain. Even if Catalonia never prevails, any headway in that movement might hurt the financial position of Spain, according to a recent note from UBS. “The market reaction might not ultimately be benign. One of the central issues behind the independence movement in Catalonia is that of fiscal independence, as Catalonia pays a large part of its tax income in fiscal transfers to the rest of the Spanish state. As a result, any compromise would likely mean more fiscal devolution which might imply fiscal challenges for the central government in Madrid,” wrote a team at UBS.
Also, if the Scots lower the Union Jack after 307 years, the republicans in Northern Ireland could make another push to get out of the kingdom. Some U.K. politicians worry that cities in Wales might seek independence as well.
Of course, when it comes to the Scottish vote, the possibility remains that markets, and perhaps the financial press, are doing what they do best—making a big deal out of a situation that ultimately will not amount to very much. “This is a very low probability event that the market’s very emotional about,” summed up Kathy Lien, managing director of FX strategy at BK Asset Management. But just in case, she is advising clients on how to avoid being exposed to any precipitous drop, in the unlikely scenario of a win for the pro-independence crowd.
Yum! Brands Tests America’s Appetite for Vietnamese Fast Food
Yum! Brands is branching out into bánh mì with a Texas test of its new Vietnamese fast-food concept. The latest experiment for the fast-food giant behind Pizza Hut, KFC, and Taco Bell focuses on the Vietnamese sandwiches at two new restaurants called Banh Shop. The first two locations will soon open in downtown Dallas and at the Dallas/Fort Worth International Airport.
The move seems like another challenge to Chipotle. Yum recently introduced U.S. Taco—a pilot effort in California that puts American fare like fried chicken and pulled pork into a taco, as an apparent answer to the popular “fast-casual” burrito chain. Now, Bahn Shop seems like a response to Chipotle’s Southeast Asian offshoot, ShopHouse, which has eight stores.
Whether there will be any widespread appetite for Southeast Asian cuisine among the fast-casual mainstream in the U.S. remains an open question. Basic awareness might be a limiting factor for Yum’s Vietnamese sandwich push. Look no further than the paltry number of Google searches for “banh mi” vs. the overwhelming hunger for “taco” queries.
Banh Shop originally seemed like an idea aimed at foreign markets. Earlier this year, a spokeswoman said it was exploring the concept “for potential international expansion some day in the future.”
Yet menu items such as “The American,” which uses ham and salami, suggest that the domestic market is still in the running, and the fanfare surrounding the Dallas debut mentions the “growing popularity” of Southeast Asian fare in the U.S. A Yum representative said there were no plans yet to expand beyond the two test stores.
Bánh mì sandwiches—which traditionally use fillings like pork belly, Vietnamese sausage, or grilled pork with cilantro, pickled carrots, and cucumbers inside a baguette—are priced from $5.95 to $6.95 each at Banh Shop.
The U.S. fast-food industry has been struggling as consumers remain cautious about their spending. Restaurant operators are looking for new ideas that might set them apart from the rest of the pack. In addition to U.S. Taco and Banh Shop, Yum also has a chicken sandwich restaurant called Super Chix and is experimenting with a higher-end KFC concept called KFC Eleven.
Sources:
1. http://www.cnbc.com/id/101993999 – CNBC
2. http://buswk.co/1y3NZNx – BusinessWeek
The Good News Is . . .
• The Commerce Department reported that retail sales increased 0.6% in August after an upwardly revised 0.3% gain in July. U.S. retail sales rose as Americans bought automobiles and a range of other goods, which eases some concerns about consumer spending and supports expectations for solid growth in the third quarter. The increase in retail sales, which account for a third of consumer spending, was in line with the expectations of economists.
• The Kroger Co., one of the world’s largest grocery retailers, reported earnings of $0.70 per share, an increase of 16.7% over year-ago earnings of $0.60. The firm’s earnings topped the consensus estimate of analysts by $0.01. The company reported revenues of $25.3 billion, an increase of 11.6%. Management attributed the company’s results to strong customer acceptance of it brands, control of operating expenses, and execution on its growth plan.
• The Eastman Chemical Company agreed to buy the Taminco Corporation, a maker of specialized chemicals, for $1.7 billion in cash. Eastman will pay $26 a share, nearly 9% above Taminco’s closing price on Wednesday. Including the assumption of Taminco’s debt, the transaction is valued at $2.8 billion. Taminco, makes niche chemicals like alkylamines for agriculture, water treatment, and oil and gas companies. By buying Taminco, Eastman said it would bolster its offerings in the food, feed, and agriculture industries, as well as yielding about $60 million in cost savings.
Sources:
1. http://1.usa.gov/L7q3Tc – US Census Bureau Economic News
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1tUFrWz – The Kroger Co.
4. http://nyti.ms/1s6elpv – NY Times Dealbook
Planning Tips
Tips for Evaluating Concierge Medical Plans
Concierge health practices are beginning to appear in virtually every major city in the United States. These clinics offer a different model that has potential advantages for both patients and physicians. However, there are drawbacks to be aware of before switching to this kind of a plan. Below are some guidelines to help you understand the benefits and drawbacks of concierge clinics.
What is concierge healthcare? – Many doctors today are establishing “concierge” or “direct pay” practices, where patients pay a monthly or annual fee for enhanced services, including same day appointments, 24/7 access to their doctor, e-mail consultations, and longer appointment times. Instead of the usual rushed 10-15 minute appointments, these doctors typically offer 45-60 minute visits allowing them to delve into their patient’s problems and craft individualized treatment and prevention plans.
How much is it likely to cost? Concierge care costs typically range from $1,000 to $20,000 per year depending mainly on the services offered. Whether concierge service makes senses depends on factors such as the cost and flexibility of health insurance options available to you, the number of visits you make to see a doctor each year, and the types of care offered. Of the estimated 5,500 concierge practices nationwide, about two-thirds charge less than $135 a month on average.
What are the advantages of concierge healthcare? A big advantage is that the higher fee allows doctors to spend more time with patients while also avoiding having insurance companies as the intermediary. Some concierge doctors make house calls, give out their cell phone numbers for speedy contact, and provide healthy lifestyle counseling. Also, the money that is spent on concierge services goes directly toward paying for the medical care and other expenses incurred at that office. Operating on a concierge clinic basis allows doctors to save on staff that would normally deal with processing insurance claims.
What are the disadvantages of concierge healthcare? The recognition of concierge medicine in the Affordable Care Act has spurred a few insurance companies to build new health plans around the model. However, most large insurers have yet to build plans around concierge practices. So you are likely to pay out-of-pocket costs for concierge medicine on top of your insurance premium. Also, the concierge plan only covers services offered at the clinic that offers the service. If you have a serious illness that requires specialty care not offered by the concierge provider, you may have to go elsewhere (and pay extra) for treatment.
Are these plans covered by health insurance? Many direct primary-care doctors recommend that a patient select a high-deductible policy with minimal premiums for emergencies, and put the money they save up front toward the concierge retainer. High-deductible plans are often paired with a Health Savings Account (HSA) plan. The IRS, however, does not recognize direct primary-care fees as eligible HSA expenses, so patients might not be able to spend pretax dollars at the concierge clinics.
Sources:
1. http://bit.ly/1qWIFqx – Medicare Patient Management
2. http://bit.ly/1nW5aXq – Investopedia
3. http://onforb.es/1q57URV – Forbes
4. http://on.wsj.com/1anHt79 – Wall Street Journal
5. http://bit.ly/PiAKUv – US News & World Report
6. http://bit.ly/1pfVtm6 – AARP
