Off the Wires

China’s G.D.P. Slows to 7 Percent, the Weakest Rate Since 2009

April 15th, 2015  |  Source:

China’s economy grew in the first three months of 2015 at its slowest quarterly pace in six years, dragged down by an industrial slowdown and a weak housing market, the government announced Wednesday.

Gross domestic product rose 7 percent from a year earlier, in line with economists’ forecasts. While the growth rate means China still ranks as one of the world’s fastest growing major economies, it marked the country’s slowest quarterly expansion since early 2009, when it was still feeling the effects of the global financial crisis.

China’s Communist Party leadership has lowered its official growth target for this year to around 7 percent. This would be the nation’s slowest annual expansion in 25 years, but leaders have said this is a price that needs to be paid in order to reduce the economy’s reliance on credit-fueled growth and get everyday shoppers to spend more of their savings.
Recent indicators suggest that the economy could be slowing more rapidly than many observers expected. In March, industrial production rose 5.6 percent from a year ago, its slowest increase since late 2008. Land purchases by real estate developers plunged 32 percent by area in the first three months of the year.

US companies on course to return $1 trillion to shareholders in 2015

April 12th, 2015  |  Source:

Shareholders in the biggest US companies stand to receive a record $1tn in cash this year, as blue chips’ concerns over the global economic outlook have diverted cash away from investment and is driving a boom in buybacks and dividends.

Shareholder returns reached more than $903bn in 2014, with $350bn in dividends and $553bn in buybacks, official data from S&P Dow Jones Indices show. It expects buybacks to rise at a “double-digit” rate this year.

Dividends have climbed on average 14 per cent annually over the past four years. Many strategists expect this pace of growth to continue this year, which would put returns at just above $400bn. Goldman Sachs forecasts buybacks to reach $604bn. Combined, returns would surpass the $1tn mark for the first time in US history.

The combination of slowing emerging market economies, concerns about the pace of the recovery in some developed markets and falling oil prices are driving down expectations for capital investment growth. This has prompted US blue chips to shift their focus, becoming the largest buyers of shares on the S&P 500 since the financial crisis, dwarfing domestic investors and helping propel the ageing bull market into its seventh year.

“There are tremendous amounts of cash on the books and you have this very slow nominal growth in most countries, so there are fewer places to deploy that cash,” said Russ Koesterich, BlackRock’s global chief investment strategist.

The $1tn figure has been primed by General Electric’s announcement on Friday that it will return some $90bn to shareholders over the next three years as it disposes of the vast majority of its financial business.

And analysts are expecting Apple to lift its programme later this month, with Credit Suisse estimating the iPhone maker could increase its existing $130bn scheme, which runs over several years, by 50 per cent.

Some companies that are generating strong profits, such as Apple, have also come under pressure from activists in recent years from investors pushing for a greater slice of the pie.

With record cash levels of $1.3tn in 2014, Nicholas Colas, chief market strategist at Convergex, said that companies believed increasing returns to shareholders was “ the right thing to do versus just hoarding the cash”.

G.E. Is Finally Exorcising Financial Demons From Jack Welch Era

April 11th, 2015  |  Source:

At long last, General Electric is on its way to exorcising the financial demons of Jack Welch.

It took 14 years, a near-death experience and a flat-lined stock price, but Mr. Welch’s successor,Jeffrey R. Immelt, is now getting out of the banking business and returning G.E. to its industrial roots. It may have taken too long, but the timing works now on many levels.

Mr. Immelt’s timing hasn’t always been so good. He took over as chairman and chief executive of G.E. on Sept. 7, 2001, and was at the helm for a financial collapse that led GE Capital to issue government-backed debt and cost the company its prized AAA rating.
Since 2009, Mr. Immelt has been shrinking the unit’s balance sheet. On Friday, he started hacking in dramatic fashion.

To start, the $260 billion pillar of corporate America said it would sellmost of its commercial real-estate assets to buyout shop Blackstone, Wells Fargo and other buyers, in a collection of transactions valued at $26.5 billion.

Over the next two years, G.E. plans to refocus its financial operations exclusively where they are directly related to benefiting its operations in healthcare equipment, energy and aviation. That will mean shedding something like $200 billion of assets on GE Capital’s books at the end of 2014 and fully offloading its publicly traded consumer credit arm,Synchrony Financial, to investors in a $65 billion divestment.

It’s an opportune moment to act. The 31 percent rise in Synchrony’s shares since going public in August illustrates the growing appeal of financial assets and how lenders with large wholesale financing needs can exist on their own. What’s more, many banks in the United States are desperate for higher returns and have loan-to-deposit ratios low enough to take on some of G.E.’s corporate loans or its equipment, inventory or franchise finance businesses.

By the time all this contraction has been completed, in three years, G.E. expects to derive 90 percent of its earnings from industrial operations compared to 58 percent today.

That’s a G.E. more like the one that Reg Jones passed on to Mr. Welch in 1981. The whole-hog push into finance wasn’t irrational, but the financial and regulatory arbitrage that benefited G.E. during the 1990s and early part of this century was brought to a grinding halt by the crisis and the greater oversight that followed.

GE Capital’s designation as a systemically important financial institution put the whole Connecticut-based conglomerate into an existential conundrum. The regulatory overhang turned off an entire generation of portfolio managers, and the unit’s return on equity was, at 8.6 percent last year, below its cost of capital. Before the restructuring announcement on Friday, GE stock was down about a third since Mr. Immelt took over.

Reducing GE Capital down to less than a systemically important financial institution size should rectify the Immelt discount in time for him to entertain a graceful succession. Handing another $90 billion back to shareholders in dividends, buybacks and Synchrony stock over the next couple of years, as planned, will further lubricate Mr. Immelt’s glide-path to the egress.

With aggressive investors increasingly taking on gigantic companies like Apple and PepsiCo, Mr. Immelt’s bold if overdue step should help keep him out of the crosshairs. Even repatriating some $36 billion of cash held overseas, which will incur a hefty tax charge, suggests the mark of a leader willing to get a move on rather than wait for rules to change, and eager to establish his legacy.

Sterling hits five-year low against dollar as election fears spook investors

April 11th, 2015  |  Source: The Guardian

Growing City jitters about the prospect of a hung parliament and signs of weakness in the key manufacturing sector prompted sterling to hit a five-year low against the dollar in foreign exchange markets on Friday.

Sterling fell to $1.4558 on Friday morning – the lowest level since the uncertain days that followed the 2010 general election. It later recovered some ground but still closed down 0.51% on the day at $1.4637. Against the euro, it was flat at €1.379.

Investors are struggling to assess the tax and spending implications of a range of possible electoral outcomes, from a minority Labour government to another Conservative-led coalition.

Michael Hewson, chief market analyst at CMC Markets, an online trading business, said: “The pound has started to come under some pressure in recent days as the prospect of political gridlock in a few weeks’ time starts to become a real possibility, at a time when some of the economic data is starting to show some signs of weakness.”

Sarah Hewin, of Standard Chartered bank, said her research suggested sterling is unlikely to recover until a government has been formed. “The lesson appears to be that the pound rallies on an end to political uncertainty when a majority government is elected, while a hung parliament and intensification of uncertainty leads to a currency drop.”

Election concerns have not fed through to share prices, however. The FTSE 100, which reflects the fortunes of the global economy at least as much as the UK’s, closed up 1.1% at a new record high of 7,089.77 points.

As well as pre-election nerves, currency traders were unsettled by lower-than-expected industrial production in February, which some analysts said pointed to a slowdown in the UK economy. Industrial production rose just 0.1% in February due to a big fall in North Sea oil production. Economists had expected a rise of 0.3%.

Isis hackers cut transmission of French broadcaster

April 9th, 2015  |  Source:

French broadcaster TV5Monde was trying to restore regular programming on Thursday after hackers claiming to be from the Islamic State of Iraq and the Levant (Isis) took over its channels and social media accounts.

The hackers cut transmission of the broadcaster’s 11 channels late on Wednesday for several hours and posted messages on its website, Yves Bigot, TV5Monde’s director, said.

They accused the French president, François Hollande, of having committed “an unforgivable mistake” by getting involved in “a war that serves no purpose”. France is part of a US-led coalition carrying out air strikes against Isis in Iraq and Syria, where the group has seized swaths of territory in the past year.

“That’s why the French received the gifts of Charlie Hebdo and Hyper Cacher in January,” the hackers said on the broadcaster’s Facebook page, referring to the twin attacks by Islamist gunmen in Paris in January that left 17 people dead over three days and deeply shocked France.

Mr Bigot told RTL radio Thursday morning that the network had regained control of its channels but was still only able to broadcast recorded programmes.

“We are not yet in a position to re-establish our broadcasting schedule nor to produce programmes,” Mr Bigot told RTL. “When you work in television . . . and discover that your 11 channels are down, that’s one of the most terrible things that can happen,” he said.

Meanwhile, the network’s website was still down for maintenance on Thursday morning after the hackers had earlier posted “I am IS [Isis]” on it together with a banner by a group calling itself Cybercaliphate.

AFP reported that the hackers also posted documents on TV5Monde’s Facebook page purporting to be the identity cards and CVs of relatives of French soldiers involved in anti-Isis operations, along with threats against the troops.

Kraft Will Merge With Heinz in Deal Backed by 3G and Buffett

March 25th, 2015  |  Source: Bloomberg

Kraft Foods Group Inc. will merge with H.J. Heinz Co. in a deal orchestrated by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc., creating the third-largest food and beverage company in North America.

Kraft shareholders will receive 49 percent of the stock in the combined entity, plus a special cash dividend of $16.50 a share, the companies said in a statement Wednesday. Berkshire and 3G will invest $10 billion in the new business, which will be known as Kraft Heinz Co. It will have dual headquarters in Pittsburgh and the Chicago area, with current Heinz Chief Executive Officer Bernardo Hees staying at the helm.

The deal creates a stable of household names -- everything from Heinz ketchup to Jell-O -- with revenue of about $28 billion. It also could presage more consolidation in the U.S. food industry, which is struggling to reignite growth. Buffett and 3G, the private-equity firm founded by Brazilian billionaire Jorge Paulo Lemann, previously teamed up to buy Heinz in 2013 and they cut costs, a strategy they aim to repeat with Kraft.

“3G has squeezed a lot out of Heinz and now they will do the same job at Kraft,” David Turner, an analyst at research firm Mintel, said in an interview. “When Buffett invests in a sector, it gives a sign that the sector is ripe for acquisitions. This will flag up other opportunities.”

Kraft shares soared as much as 33 percent to $81.50 in New York, the biggest intraday gain since the company split from Mondelez International Inc. more than two years ago. That gives Kraft a valuation of about $48 billion.

Growth Opportunities

When the current Kraft was spun off in 2012, Mondelez inherited the overseas snack businesses, giving it bigger growth opportunities internationally. Though Kraft kept the name of the original business, it was smaller and relegated to the U.S. market. While Kraft has plenty of iconic brands, including Velveeta and Philadelphia Cream Cheese, the company hasn’t been able to energize sales in a mature industry.

With the merger, Kraft’s products will benefit from Heinz’s presence outside the U.S. The two companies also expect to trim $1.5 billion in annual costs by the end of 2017.

Israel spied on Iran talks

March 24th, 2015  |  Source:

Soon after the U.S. and other major powers entered negotiations last year to curtail Iran’s nuclear program, senior White House officials learned Israel was spying on the closed-door talks.

The spying operation was part of a broader campaign by Israeli Prime Minister Benjamin Netanyahu’s government to penetrate the negotiations and then help build a case against the emerging terms of the deal, current and former U.S. officials said. In addition to eavesdropping, Israel acquired information from confidential U.S. briefings, informants and diplomatic contacts in Europe, the officials said.

The espionage didn’t upset the White House as much as Israel’s sharing of inside information with U.S. lawmakers and others to drain support from a high-stakes deal intended to limit Iran’s nuclear program, current and former officials said.

“It is one thing for the U.S. and Israel to spy on each other. It is another thing for Israel to steal U.S. secrets and play them back to U.S. legislators to undermine U.S. diplomacy,” said a senior U.S. official briefed on the matter.

The U.S. and Israel, longtime allies who routinely swap information on security threats, sometimes operate behind the scenes like spy-versus-spy rivals. The White House has largely tolerated Israeli snooping on U.S. policy makers — a posture Israel takes when the tables are turned.

The White House discovered the operation, in fact, when U.S. intelligence agencies spying on Israel intercepted communications among Israeli officials that carried details the U.S. believed could have come only from access to the confidential talks, officials briefed on the matter said.

Supermoon Eclipses Sun as Spring Comes to Northern Hemisphere

March 20th, 2015  |  Source: Bloomberg

At 6:47 p.m. in New York, the sun will cross the celestial equator and spring will begin in the Northern Hemisphere. The big moment will occur at 10:47 p.m. in London, 7:47 a.m. Saturday in Tokyo.

In Wellington, New Zealand, and Sydney, as well as Sao Paulo and the rest of the Southern Hemisphere, autumn will descend at the same time.

Aside from its annual trip north across the equator, the sun has been busy this week. It may not be quite right to anthropomorphize the nearest star, but this week it seems to fit.

As the U.S. was waking up Friday, a supermoon -- so called because it’s at its closest point to the Earth, and therefore looks larger than usual -- was drifting in front of the sun.

“The path of the Moon’s shadow is quite narrow, so you usually have to travel to see a solar eclipse,” said William Pesnell, project scientist with the Solar Dynamics Observatory at NASA. Friday’s “total solar eclipse is visible only from the Faroe Islands and Svalbard, but most of Europe will see a partial solar eclipse.”

Earlier this week, the sun fired off a couple of eruptions that merged just as they arrived in the Earth’s neighborhood, setting off a brilliant aurora display across the high latitudes.

All of which begs the question: With the supermoon between the Earth and sun, could our largest natural satellite be a shield in the event of a huge coronal mass ejection?

Too Small

“Nope, too small to make a difference,” Robert Rutledge of the U.S. Space Weather Prediction Center said in an e-mail interview.

The sun is pretty big.

The earth, by comparison, is about the size of an average sunspot, according to the National Weather Service.

The power of the sun is about to have a major impact on the Northern Hemisphere’s weather.

As the sun creeps north and bathes the Arctic region in light and warmth, the weather mechanics across the entire hemisphere change, said Stephen Baxter, a meteorologist at the U.S. Climate Prediction Center in College Park, Maryland.

The temperature gradient from the North Pole to the equator weakens and becomes less extreme than it is in winter, when the cold, dark pole stands in stark contrast to the warm, bright equator.

“We tend to see less large-scale storm activity,” Baxter said. “Big, large-scale storms develop in response to the very strong temperature gradients.”

ACLU files new lawsuit over Obama administration drone 'kill list'

March 16th, 2015  |  Source: The Guardian

Top civil liberties group calls for greater transparency regarding ‘targeted killing program’ and how officials handle possibility of civilian deaths

As the US debates expanding its campaign against the Islamic State beyond Iraq and Syria, the leading US civil liberties group is intensifying its efforts to force transparency about lethal US counterterrorism strikes and authorities.

On Monday, the American Civil Liberties Union (ACLU) will file a disclosure lawsuit for secret Obama administration documents specifying, among other things, the criteria for placement on the so-called “kill list” for drone strikes and other deadly force.

Information sought by the ACLU includes long-secret analyses establishing the legal basis for what the administration terms its “targeted killing program” and the process by which the administration determines that civilians are unlikely to be killed before launching a strike, as well as verification mechanisms afterward to establish if the strike in fact has caused civilian deaths.

Read on here:

Former SEC Director Rips the Red Tape Off His Mouth

March 10th, 2015  |  Source: Bloomberg

For more than a decade, John Ramsay had red tape over his mouth. Now that he’s left government bureaucracy, he says he’s been “uncorked.”

Ramsay, 55, formerly the U.S. Securities and Exchange Commission’s director of trading and markets, joined the stock-trading venue founded by Brad Katsuyama, IEX Group Inc., in June and soon began slamming the industry he’d overseen for the SEC. He called out the “convoluted” and “illogical” pricing rules of major stock exchanges and compared the $25 trillion U.S. stock market’s structure to the Death Star of “Star Wars.”

Ramsay’s denunciations come during a period of unprecedented scrutiny of equities trading. A chorus of criticism, sparked by the claim in Michael Lewis’s book about Katsuyama and IEX, “Flash Boys,” that the market is rigged against retail investors, has questioned the tactics involved in using algorithms to buy and sell shares in fractions of a second. Ramsay’s opinions, blunt and impassioned, have extra heft because of his experience as a regulator.

“I’ve been able to find my voice on these issues in a way I couldn’t have done when I was in the government, because you’re always limited by internal politics and not wanting to get too far out in front of the agency,” he said. “I feel like I’ve been a little bit uncorked.”

About Value News Network

Value is the only commonality in an increasingly complex, challenging and interdependent world.
Laurance Allen: Editor + Publisher

Connect with Us