Welcome to CrushTheStreet.com’s Weekly Market Wrap-up!
Our top story of the week is the shift in business sentiment as more companies are moving operations away from California and into commerce-conducive states such as Texas, Nevada, and Florida. Texas governor Rick Perry has had some success in luring business into his state, which features relatively lower taxes and less restrictive regulations.
One popular name that took the jump is CKE Restaurants, the parent company of Carl’s Jr. and Hardee’s, along with several other fast-food chains. While CKE chief executive, Andy Puzder, currently has no intention of moving its headquarters from its Anaheim, California base, the company has implemented changes in its growth strategy, eschewing the Golden State in favor of Texas and the mid-western region.
In addition to lower tax rates, burdensome wage and hour laws are less of an issue in Texas, according to Mr. Puzder. The often outspoken CEO went on to state that business permits in Texas can be obtained in about two months, whereas a similar permit would often take close to a year in California. This timeliness is integral to CKE’s corporate strategy, which intends to build 300 stores over the next 6 years in the Lone Star state alone. In stark contrast, CKE has planned very few openings for California.
With a gross state product of nearly 2.2 trillion dollars, California is in little danger of losing its status as the most economically powerful state in the Union. As it stands now, its economy would be the eighth largest in the world, using rankings provided by the International Monetary Fund. Its revenue accounts for 13.2% of U.S. gross domestic product, and its home to some of the largest publicly traded companies in the world.
Nevertheless, California has been hit hard during the 2008 financial crisis and the ensuing recession, with the Bureau of Labor Statistics reporting that the Golden State has the fifth highest unemployment rate in the nation at 7.6 percent. To put this number into perspective, California’s unemployment rate is over 20-percent higher than the national average. This is a sobering statistic when you consider some of the top employers of the state, which include powerful corporations such as Apple, Intel, and Northrop Grumman, have collectively been forced to downsize or shortchange highly educated and skillful talent.
And with stifling laws and regulations, the profit incentive will likely worsen. Combine this with rising commodity prices, minimum wage pressures, and additional healthcare costs, more companies will follow CKE’s example and seek greener pastures elsewhere. Just recently, Toyota announced that it will move its US-headquarters to Dallas, Texas. Occidental Petroleum Corporation made a similar transition, departing Los Angeles for the energy-friendly base of Houston.
In financial news, the markets closed early on Thursday ahead of the July 4th weekend. The non-farm payroll report for June shot the Dow Jones up past the 17,000 mark for the first time in history, while the S&P 500 also received a record-breaking lift, closing at 1,985. With the general sentiment moving back to a risk-on environment, the metals complex was under some pressure, with gold closing down to 1,320 and silver giving up 5-cents on the ask to make it 21.20. Palladium bucked the trend, moving up two dollars to close at 863. Digital currencies had a strong showing, with bitcoin moving up earlier in the week, eventually settling in a range at $850 dollars.
And that will do it for this edition. Thanks for watching and we’ll see you next week!