Tweet

 

Email

Email to a friend:

To:

Separate multiple addresses with commas.

From:

Name: Please send me a copy Message:

Verification code

Enter the code from aboveRequired

Send

This is an informative column by Holman Jenkins for The Wall Street Journal. Here is a section, posted without further comment:

As a rule, private equity takes on the most troubled companies because turning them around offers the biggest profit opportunities. That's why private equity tends to generate more than its share of traumatic headlines. Look no further than Ripplewood Holdings' decision to put the maker of Twinkies into bankruptcy this week. It's the kind of decision that, were Ripplewood's principals ever to run for office, would get them savaged in an ad.

But guess what? Ripplewood also bought the company, Hostess Brands, out of bankruptcy three years ago, when it was called Interstate Bakeries. Ripplewood is just the latest manager to wrestle unsuccessfully with the company's fundamental problem, a unionized workforce in an industry where competitors aren't unionized.

Next time you're choosing a fattening indulgence in the checkout line, ask yourself if you're willing to pay extra so Twinkies and Wonder Bread (made by the same company) can arrive at the store on different trucks? So the driver can be excused from helping to unload? So the company can pay workers-comp costs way out of line the industry's? So a company with just 19,000 employees can administer 40 different pension plans?

We didn't think so.

But the best antidote to foolish thinking about job creation is the work of economists Steven J. Davis and John Haltiwanger. Their painstaking research has revealed a side of America's dynamism that isn't always pretty. Between 1977 and 2005, years roughly overlapping Mr. Romney's business career, some 15% of all jobs were destroyed every year, even as total jobs grew by an average of 2% a year. Job creation and destruction are both relentless, the authors showed in paper after paper. The small difference between the two is what we call prosperity.

Email of the day (1) - On Tesco and Carnival:

"Given the sudden breakdowns in the charts of Tesco and Carnival on the news affecting them in the last few days, does this offer a buying opportunity - based on technical analysis - for two very strong companies?"

My view - Thanks for an interesting question which Eoin and I found ourselves discussing from several standpoints.

This item continues in the Subscriber's Area.

Email of the day (2) - On muddling through:

"Like your other readers I try to resist the emotional pull of despairing at the mess that this world is in; the feeling of righteous indignation is strangely comforting but ultimately useless.

"When my four year old daughter sits on my knee, I'm often anxious for her future but I can't forget when I was four myself and on my own father's knee, he showed me the sinister shapes outside our window less than half a mile away and explained that they were nuclear missiles and he told me exactly what they were for and what they were capable of and why we needed them there.

"The world was hugely lucky to emerge from the mess our fathers created and I'm hopeful that with a little more luck we might eventually muddle through this generation's SNAFU. I'm trying my best to guide my family's tiny finances through the storm and if my little daughter would just get off my lap I could do a bit more research on the subject!"

My comments - Thanks for a lovely email. Those memories - fortunately from the secure position on your father's knee - help to put "this generation's SNAFU" in perspective.

We all experience a degree of despair from time to time. At best it is a sign of intelligent awareness and concern regarding problems or uncertainties over which we may have little or no control. At worst it becomes a clinical problem which undermines the quality of our lives.

I trust that your daughter will always have fond memories of her childhood, not least when sitting reassuringly in your lap.

Stirrings in the uranium sector - This item is in the Subscriber's Area and contains two recent reports.


Clive Hale's View from the Bridge - My thanks to the author for his light hearted take on current events.



Additional commentary by Eoin Treacy

Euro-Area Bank Dividends May Tumble Below Post-Lehman Low - This article by Alexis Xydias for Bloomberg may be of interest to subscribers. Here is a section:

Lenders are under pressure to raise an additional 115 billion euros ($146 billion) of capital by June to meet European rules. They're finding it harder to generate that money from earnings, which are forecast to shrink 20 percent from 2010 levels, or raise it from investors in rights offerings. Bank stocks in the region have declined 36 percent in the past year.

"Shareholders and regulators do not currently see eye to eye as regulators are asking the banks to do recapitalizations at the worst time possible," said Christophe Nijdam, an analyst at Alphavalue in Paris. "The big question mark will be the economic slowdown. The more severe it is, the higher the cost of risk and the more constrained the dividend-payment capability."

All four publicly listed French lenders, five of Spain's nine banks and nine out of 14 in Italy will cut or omit their dividends when they announce annual earnings, the Bloomberg estimates show. In all, 53 lenders in 11 euro nations will pay a combined 9.24 euros a share in dividends, 41 percent less than the previous year and 28 percent less than distributed for 2009, the year after Lehman's bankruptcy, the data show.

My view - Europe's banks are badly in need of capital and dividends are among the easier cuts to make among a range of rather unpalatable choices. This table of the members of the Dow Jones Euro Stoxx Banks Index suggests that some of the only banks with no 12-month dividend yield are from countries in receipt of bailout funds. The number of such banks looks set to increase.

This section continues in the Subscriber's Area.

Rupee to Gain Fastest in '12 on Asia Inflow, Top Forecaster Says - This article by Lilian Karunungan and Yumi Teso for Bloomberg may be of interest to subscribers. Here is a section:

Asian currencies will rebound this year led by India's rupee, the worst performer in 2011, said Oversea-Chinese Banking Corp., the most-accurate forecaster for the region in the past six quarters.

The rupee will advance 5.1 percent to 50.5 per dollar by year-end followed by a 3.9 percent rally to 8,730 by Indonesia's rupiah, according to Singapore's second-largest bank. Barclays Capital, the second-best forecaster as measured by Bloomberg News, expects South Korea's won to outpace the other currencies, climbing 12 percent to 1,025.

"We'll probably see more signs of a nascent recovery perhaps sometime into the second quarter," said Emmanuel Ng, a strategist at OCBC in Singapore. "You should see more structural foundation for capital inflows into Asia."

A recovering U.S. economy and a shift in policy focus in China to bolster growth will support Asian currencies this year even as Europe struggles with its debt crisis, according to Barclays Capital, which predicts Malaysia's ringgit, the Thai baht, the rupee and the Taiwan dollar will rise more than 10 percent in 2012. ING Groep NV, the third-best forecaster, is less optimistic, expecting moves to range from a 4.1 percent gain in the rupee to a 0.4 percent decline in the rupiah.

My view - The Asian Dollar Index broke below the 200-day MA in September and continues to range below it. The Index retested the lower side in December but has so far failed to rally convincingly. A sustained move above the MA, currently near 117, would be required to suggest a return to medium-term demand dominance.

This section continues in the Subscriber's Area.

Poorest Nations Host Biggest Gas Finds in Sign of Deals - This article by Eduard Gismatullin for Bloomberg may be of interest to subscribers. Here is a section:

"Assuming that the drilling success is continued you would expect to see consolidation around probably one mega-terminal" for Mozambique and one in Tanzania, Ophir Chief Executive Officer Nick Cooper said in an interview. "Obviously the bigger fish tend to eat the smaller fish."

BP had been in talks on East Africa projects with Ophir, while Shell teamed up with Petroleo Brasileiro SA in October to explore off Tanzania.

"It's obviously a basin where many people of the world are looking closely," said Shell's executive director for exploration and production, Malcolm Brinded.

Tanzania, where Ophir's Cooper reckons exploration has lagged 18 months behind Mozambique, will be a focus of drilling this year. Ophir and its partner BG Group Plc have so far found about 4 trillion cubic feet of gas in the East African country, where a per capita income of $1,400 ranks it 201st in the world, according to the Central Intelligence Agency's fact book.

Dart Energy to Expand European Shale-Gas Business, Target Asia - This additional article by James Paton for Bloomberg may also be of interest. Here is a section:

China held its first auction of shale-gas exploration rights in June and has scheduled a second round this month.

Foreign companies, while banned from bidding, are allowed to participate as project partners. China's "technically recoverable" reserves are almost 50 percent more than those in the U.S., according to the Energy Information Administration.

India plans to hold its first shale-gas exploration rights auction by 2013 after surveying the country's reserves and drawing up policies, Oil Secretary G.C. Chaturvedi said Dec. 21.

My view - While often described as major oil companies, Exxon Mobil and Royal Dutch Shell among others have for some time produced more natural gas than oil. Natural gas supply, from multiple sources, is growing rapidly. The USA's shale gas developments have been by far the most publicized, but Middle Eastern and Australian supply is also growing rapidly. The prospect of a major supply source evolving in East Africa and the potential for China and India to increase their supply are also encouraging developments. LNG development is making natural gas a more internationally traded commodity and it appears to be only a matter of time before a globally reflective pricing structure is developed for it.

This section continues in the Subscriber's Area.

Email of the day (1&2) - on an addition to the Chart Library:

"Could you be so kind to add STB VN Equity to the chart library? (Saigon Thuong Tin Commercial Joint-Stock Bank, also known as Sacombank). Many thanks!"

And

"Could you please add NorthWest Healthcare Properties NWH-U to the library?"

My comment - Thank you for these suggestions which have been added to the Chart Library.

Speaking engagements in the USA - I have accepted an invitation to speak to the Los Angeles chapter of the MTA on April 11th. The venue has yet to be confirmed but will be in the Long Beach area. Non members are welcome to attend. The topic will be "To Hoard or to Horde: risks and opportunities from participating with the crowd."

I still have some space available on my itinerary. If you would like me to speak to your local chapter or organisation in California or New York please contact your respective chairperson and ask them to contact me.

The Chart Seminar 2012 - Following a sell-out tour to Singapore and Australia last year, The Chart Seminar will be held in San Francisco, New York and London this year. Please be aware that the early booking rate for non- subscribers at the US seminars expires on January 31st.

We are currently taking bookings for our San Francisco and New York dates in April as well as London seminars in May and November. Anyone interested in securing a place at any of our events should contact Sarah Barnes at sbarnes@fullermoney.com.

The date and venues for my seminars so far in 2012 are:

San Francisco - April 16th &17th 2012 Nikko Hotel

New York - April 23rd & 24th 2012 at The Manhattan Club (above Rosie O'Grady's) at 800 7th Avenue

London - May 25th & 25th 2012 at the Radisson Edwardian Hampshire

London - November 22nd & 23rd 2012 at the Radisson Edwardian Hampshire

The full rate is £950 + VAT. (Please note US delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires on January 30th for the US seminars. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.