WSJ Investors Don't Buy Publicis-Omnicom Ad Campaign

Investors Don't Buy Publicis-Omnicom Ad Campaign

It may not be too late to turn back time for Omnicom Group and Publicis Groupe.
In the past few weeks, the fate of the proposed $35 billion merger between the two ad giants has been thrown into doubt amid reports of personnel disagreements and conflicting statements by their chief executives over when the deal is likely to close and the severity of regulatory hurdles.
While the companies say the deal remains on track, this bodes poorly for the chances of a harmonious partnership between the two leaders who are slated to be co-CEOs of the combined entity. It also raises the question of what would happen if the deal falls apart. The answer, for investors, just might be: not all that much. That, in turn, raises questions about the purported strategic rationale for the tie-up.
Neither Omnicom nor Publicis seemed in need of a deal before the surprise announcement last July that they would combine forces. And both would likely go back to pursuing their respective strategies if the merger founders.
For Omnicom, this has consisted of steady earnings growth, regular share buybacks and the occasional small acquisition. Publicis has taken a bolder tack, paying big prices for flashier digital properties such as Razorfish and Digitas, but it also has been a steady stock-market performer.
The deal was sold to shareholders as a way to fend off competition from Big Tech players such as Google and Facebook by making the ad companies better equipped for an industry increasingly dominated by automated trading of inventory.
The focus this brought on the ad companies' shortcomings in that department might have exposed some vulnerability. That could potentially lead them to seek out other deals, such as a merger with Interpublic Group of Cos., if this one falls through, according to Pivotal Research.
The combination also was expected to come with $500 million of annual cost savings over five years, in addition to tax savings and cross-selling opportunities. At the time, UBS estimated the benefit of the deal to each company's stock at about 7%.
But shareholders never really seemed to buy into this. Shares of Omnicom actually closed lower on the first day of trading after the deal was announced, while those of Publicis were flat. Over the following month, Omnicom's shares tumbled 7.5%, and Publicis's fell 6.7%. Shares of both subsequently rose, but they have fallen only 5.5% and 4.4%, respectively, since April 22 when Omnicom CEO John Wren made comments suggesting the deal was in danger.
Shareholders seem, rightfully, to have been expressing hesitation about the difficult task of combining two huge ad companies with different cultures, based on different continents. They also may have been signaling that the threat from Big Tech is overblown or that the merger isn't the defense the ad companies initially made it out to be.
Even ad firms can get too creative at times.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com

>>> Pfizer to pressurise AstraZeneca shareholders into talks on GBP 50-per-share offer

Pfizer to pressurise AstraZeneca shareholders into talks on GBP 50-per-share offer Pfizer is hoping to force AstraZeneca to enter takeover negotiations by warning the UK-based drugs company’s shareholders it will not revise its existing GBP 63bn (EUR 77bn) offer, The Sunday Timesreported. The report cited anonymous senior Pfizer insiders who said the New York-based pharmaceuticals group is planning a “bear hug” action on its British target by stressing to Astra investors it will not up its GBP 50-per-share approach, as well as claiming Astra’s drug-development pipeline has weaknesses.

According to senior banking sources cited in the piece, Astra’s board will not enter talks until Pfizer increases its offer to at least GBP 55 per share. Pfizer is unwilling to offer more without seeing more detailed information about Astra’s product prospects, the report said. According to senior people at Pfizer, the American company is particularly keen to examine details relating to Astra’s heart treatment Brilinta, the item reported.

Meanwhile, the Mail on Sunday said industry insiders are expecting an increased bid from Pfizer before next weekend. However, people with close links to the business said it is not in any hurry to table a revised offer prior to the Takeover Panel-imposed 26 May deadline, the report stated.

Source Sunday Times

WSJ :Buffett Defends Coca-Cola Abstention at Berkshire Meeting

Buffett Defends Coca-Cola Abstention at Berkshire Meeting Still Says Beverage Maker's Compensation Plan Excessive, But Couldn't Back Winters's 'No' Vote

Berkshire Hathaway Inc. BRKA -0.63% held its annual meeting in Omaha, Neb., on Saturday, with Chairman Warren Buffett once again defending his decision to abstain from voting on a Coca-Cola Co. KO +0.42% equity compensation plan.

"It was the most effective way to behave for Berkshire," Mr. Buffett said in response to a shareholder question from the floor of the CenturyLink Center auditorium.

Berkshire is Coca-Cola's largest shareholder with a 9% stake, and Mr. Buffett said he withheld his vote for two reasons: He didn't want to "go to war" with the beverage maker's management, which he supports, and he didn't want to endorse a public campaign against the equity plan by a smaller Coke shareholder by voting "no."

Mr. Buffett also expressed support for the management of Bank of America Corp.BAC +1.06% , another company in which Berkshire Hathaway owns preferred stock.

Last month, the bank had to reverse course on a stock buyback and dividend-increase plan after miscalculating capital levels. "That error they made does not bother me," Mr. Buffett said in response to a shareholder question. "It doesn't change my feeling about Bank of America's risk management one iota."

Mr. Buffett invested $5 billion in Bank of America in 2011 in the form of preferred stock that paid 6% a year, and received warrants to purchase 700 million shares as part of that deal. The terms of the preferred stock were renegotiated earlier this year to allow the lender to include it as part of its capital.

The bank was forced to shelve a plan to repurchase shares and boost its dividend for the first time since 2008, after discovering an error that left the lender with $4 billion less in capital than it thought it had.

Shareholders and analysts asked several probing questions of Mr. Buffett and Berkshire Vice Chairman Charlie Munger, seeking information on recent challenges at Berkshire's railroad, how much the company pays certain top executives, as well as plans to use its enormous cash hoard.

Responding to a question from Barclays analyst Jay Gelb on how much Berkshire could spend on an acquisition, Mr. Buffett said he was willing to spend as much as $50 billion and take on debt or sell holdings from its stock portfolio if the right opportunity came along.

However, because Berkshire has more than $40 billion of cash and about half of that available to use for deals, Mr. Buffett said he didn't expect to have to sell stocks to fund a purchase. Berkshire owns multibillion-dollar stakes in companies such as IBM,IBM -1.08% Coca-Cola, American Express, AXP +0.13% Exxon Mobil and Wells Fargo. WFC -0.12%

Mr. Buffett also praised 3G Capital, the Brazilian investment firm that Berkshire partnered with last year to buy ketchup maker H.J. Heinz. 3G is known for being a ruthless cost-cutter that gets heavily involved in running the companies it owns. That approach is at odds with Berkshire, where Mr. Buffett gives the managers of subsidiary businesses wide latitude. However, Mr. Buffett said he is happy with 3G as a partner and would welcome the chance to do more deals with them.

Earlier, tens of thousands of Berkshire Hathaway shareholders traveled to Omaha for a day of discourse with Mr. Buffett and Mr. Munger, who were scheduled to field questions for over six hours from shareholders, a panel of analysts and another of journalists.

The session broke for lunch at noon central time, allowing shareholders to peruse the display hall nearby, where Berkshire-owned companies such as See's Candies, Dairy Queen and Fruit of the Loom were selling their wares. These temporary display booths collectively do millions of dollars of business over the Berkshire-meeting weekend, which Mr. Buffett encourages at the event he has called "Woodstock for capitalists."

The start of the annual meeting follows Friday's announcement of lower first-quarter profits at Berkshire, which were weighed down by two of the investment holding company's major businesses, including the Burlington Northern Santa Fe railroad. The railroad reported a $724 million first-quarter profit, down from $798 million in the prior year, which the company attributed to weather- and service-related challenges.

Mr. Buffett said the railroad has recently suffered from service challenges because of a big increase in volume on a route that carries oil from the Bakken shale. "We've got a lot of trains running on that line that weren't running five years ago," he said, adding that Burlington Northern would spend $5 billion in capital expenditures this year to fix the problems. The railroad's executive chairman, Matt Rose, added that Burlington was also hurt by a severe winter.

However, gains at Berkshire Hathaway's energy and utility business, as well as its manufacturing operations, helped the overall results. The $5.6 billion purchase last year of Nevada utility NV Energy by Berkshire Hathaway Energy, formerly called MidAmerican Energy Holdings Co., also helped earnings. Mr. Buffett said during the meeting that the energy business, which this week agreed to buy a Canadian power transmission unit called AltaLink from SNC-Lavalin Group for $2.9 billion, would likely be an active deal-maker.

Berkshire is a holding company that owns dozens of operating business and a massive portfolio of securities. At its core is an insurance business that brings in billions of dollars from premiums paid by customers.

A shareholder proposal that asked the Berkshire board to consider paying a dividend was roundly defeated, getting less than 2% of the vote and affirming Mr. Buffett's argument that leaving him and Mr. Munger to allocate Berkshire's capital is a better use of funds than returning that money to shareholders. He said the proposal made it sound like "shareholders were bereft of the necessities of life" because Mr. Buffett was hoarding money in Omaha.

Mr. Buffett briefly displayed a tally that broke down the vote by holders of the Class A shares and the much smaller Class Bs, which showed little variation between the two classes of stock. And even removing Buffett's own sizable stake from the calculation failed to lift the number of supporters for a dividend beyond 3%.

One shareholder asked how Mr. Buffett's son, Howard Buffett, could be trusted to defend Berkshire's "culture and morals that we hold so dear," given that he didn't stand up for Mr. Buffett's principles by voting in favor of Coke's equity compensation plan for executives.

Howard Buffett is a director of both Coca-Cola and Berkshire, and is expected to become the conglomerate's nonexecutive chairman after the elder Mr. Buffett is gone. "He's the perfect guy" to carry out the role of preserving Berkshire's culture and values, Mr. Buffett said of his son. "The nonexecutive board chairman is not there to set compensation, he's there to facilitate a change if the board decides a change is needed."

In defending his son and his stance on Coke, Mr. Buffett also said it was "almost unheard of" for board members to vote against pay plans that have been approved by compensation committees. In his 55 years of being on corporate boards on 19 companies other than Berkshire, Mr. Buffett said he has never seen directors oppose a pay plan that had been approved by the compensation committee.

"I've voted for compensation plans in various places that are far from what I would have designed myself," Mr. Buffett said. "That's the way boards work." He said attempting to push changes amounts to rude corporate behavior: "You keep belching at the dinner table, you'll be eating in the kitchen."

David Winters, chief executive at Wintergreen Advisers LLC, which owns about 2.8 million Coca-Cola shares, has argued the compensation plan, including issuing 340 million new shares and stock options over four years, could cause nearly 17% of shareholder dilution. Coke has disputed Mr. Winters's calculations.

Warren Buffett is everywhere at the Berkshire Hathaway shareholders meeting in Omaha, Nebraska. From cartoons to cutouts, the Oracle of Omaha was on display, as well as his company's businesses, all over the event. Mr. Buffett previously said that while he agreed with Mr. Winters's assessment that the plan was excessive, the smaller shareholder's numbers were inaccurate, and that was reason not to join Mr. Winters in voting "no" on the compensation plan.

Mr. Buffett said that based on his own calculations, Coke's plan, which includes stock options that can be exercised in four years, would lead to a dilution of about 108 million shares, or 2.5%, of the company's shares outstanding.

He based his math on Coke options being issued at the current price of around $40 a share and trading around $60 apiece when the options can be exercised in four years. "I don't like dilution, and I don't like 2.5% dilution," he said.

He added that he discussed the matter with Mr. Munger and both agreed that abstaining was the best way to proceed. "I think we handled the whole situation very well," Mr. Munger added.

The Wall Street Journal reported this week that Coca-Cola will likely revise its executive-compensation plan after it goes into effect next year, bowing to pressure from Mr. Buffett.

Mr. Buffett aired his reservations about the plan to Coca-Cola Chairman and Chief Executive Muhtar Kent after Mr. Winters launched a public campaign against the compensation plan, which nonetheless was approved by 83% of votes at Coke's annual meeting.

Mr. Buffett's role in the Coke vote is being closely watched by shareholders of Berkshire Hathaway. Mr. Buffett frequently has criticized executive pay in the past, including the award of stock-options, which he says are like lottery tickets that can provide outsize rewards. At the 2009 Berkshire annual meeting he said big shareholders can do more to keep executive compensation in line by speaking out.

At Berkshire's 2009 gathering, he said that if large investors spoke out against compensation practices, it could be more effective than having increased regulation. "The way to get big shots to change their behavior is to embarrass them," he said.

Several Berkshire shareholders, speaking earlier this week, said they were surprised Mr. Buffett didn't vote against the Coke plan as a way of sending a message.

WSJ : The Questionable Link Between Saturated Fat and Heart Disease

The Questionable Link Between Saturated Fat and Heart Disease Are butter, cheese and steak really bad for you? The dubious science behind the anti-fat crusade

"Saturated fat does not cause heart disease"—or so concluded a big study published in March in the journal Annals of Internal Medicine. How could this be? The very cornerstone of dietary advice for generations has been that the saturated fats in butter, cheese and red meat should be avoided because they clog our arteries. For many diet-conscious Americans, it is simply second nature to opt for chicken over sirloin, canola oil over butter.

The new study's conclusion shouldn't surprise anyone familiar with modern nutritional science, however. The fact is, there has never been solid evidence for the idea that these fats cause disease. We only believe this to be the case because nutrition policy has been derailed over the past half-century by a mixture of personal ambition, bad science, politics and bias.

Our distrust of saturated fat can be traced back to the 1950s, to a man named Ancel Benjamin Keys, a scientist at the University of Minnesota. Dr. Keys was formidably persuasive and, through sheer force of will, rose to the top of the nutrition world—even gracing the cover of Time magazine—for relentlessly championing the idea that saturated fats raise cholesterol and, as a result, cause heart attacks.

This idea fell on receptive ears because, at the time, Americans faced a fast-growing epidemic. Heart disease, a rarity only three decades earlier, had quickly become the nation's No. 1 killer. Even President Dwight D. Eisenhower suffered a heart attack in 1955. Researchers were desperate for answers.

As the director of the largest nutrition study to date, Dr. Keys was in an excellent position to promote his idea. The "Seven Countries" study that he conducted on nearly 13,000 men in the U.S., Japan and Europe ostensibly demonstrated that heart disease wasn't the inevitable result of aging but could be linked to poor nutrition.

Critics have pointed out that Dr. Keys violated several basic scientific norms in his study. For one, he didn't choose countries randomly but instead selected only those likely to prove his beliefs, including Yugoslavia, Finland and Italy. Excluded were France, land of the famously healthy omelet eater, as well as other countries where people consumed a lot of fat yet didn't suffer from high rates of heart disease, such as Switzerland, Sweden and West Germany. The study's star subjects—upon whom much of our current understanding of the Mediterranean diet is based—were peasants from Crete, islanders who tilled their fields well into old age and who appeared to eat very little meat or cheese.

As it turns out, Dr. Keys visited Crete during an unrepresentative period of extreme hardship after World War II. Furthermore, he made the mistake of measuring the islanders' diet partly during Lent, when they were forgoing meat and cheese. Dr. Keys therefore undercounted their consumption of saturated fat. Also, due to problems with the surveys, he ended up relying on data from just a few dozen men—far from the representative sample of 655 that he had initially selected. These flaws weren't revealed until much later, in a 2002 paper by scientists investigating the work on Crete—but by then, the misimpression left by his erroneous data had become international dogma.

In 1961, Dr. Keys sealed saturated fat's fate by landing a position on the nutrition committee of the American Heart Association, whose dietary guidelines are considered the gold standard. Although the committee had originally been skeptical of his hypothesis, it issued, in that year, the country's first-ever guidelines targeting saturated fats. The U.S. Department of Agriculture followed in 1980.

Other studies ensued. A half-dozen large, important trials pitted a diet high in vegetable oil—usually corn or soybean, but not olive oil—against one with more animal fats. But these trials, mainly from the 1970s, also had serious methodological problems. Some didn't control for smoking, for instance, or allowed men to wander in and out of the research group over the course of the experiment. The results were unreliable at best.

But there was no turning back: Too much institutional energy and research money had already been spent trying to prove Dr. Keys's hypothesis. A bias in its favor had grown so strong that the idea just started to seem like common sense. As Harvard nutrition professor Mark Hegsted said in 1977, after successfully persuading the U.S. Senate to recommend Dr. Keys's diet for the entire nation, the question wasn't whether Americans should change their diets, but why not? Important benefits could be expected, he argued. And the risks? "None can be identified," he said.

In fact, even back then, other scientists were warning about the diet's potential unintended consequences. Today, we are dealing with the reality that these have come to pass.

One consequence is that in cutting back on fats, we are now eating a lot more carbohydrates—at least 25% more since the early 1970s. Consumption of saturated fat, meanwhile, has dropped by 11%, according to the best available government data. Translation: Instead of meat, eggs and cheese, we're eating more pasta, grains, fruit and starchy vegetables such as potatoes. Even seemingly healthy low-fat foods, such as yogurt, are stealth carb-delivery systems, since removing the fat often requires the addition of fillers to make up for lost texture—and these are usually carbohydrate-based.

The problem is that carbohydrates break down into glucose, which causes the body to release insulin—a hormone that is fantastically efficient at storing fat. Meanwhile, fructose, the main sugar in fruit, causes the liver to generate triglycerides and other lipids in the blood that are altogether bad news. Excessive carbohydrates lead not only to obesity but also, over time, to Type 2 diabetes and, very likely, heart disease.

The real surprise is that, according to the best science to date, people put themselves at higher risk for these conditions no matter what kind of carbohydrates they eat. Yes, even unrefined carbs. Too much whole-grain oatmeal for breakfast and whole-grain pasta for dinner, with fruit snacks in between, add up to a less healthy diet than one of eggs and bacon, followed by fish. The reality is that fat doesn't make you fat or diabetic. Scientific investigations going back to the 1950s suggest that actually, carbs do.

The second big unintended consequence of our shift away from animal fats is that we're now consuming more vegetable oils. Butter and lard had long been staples of the American pantry until Crisco, introduced in 1911, became the first vegetable-based fat to win wide acceptance in U.S. kitchens. Then came margarines made from vegetable oil and then just plain vegetable oil in bottles.

All of these got a boost from the American Heart Association—which Procter & Gamble, the maker of Crisco oil, coincidentally helped launch as a national organization. In 1948, P&G made the AHA the beneficiary of the popular "Walking Man" radio contest, which the company sponsored. The show raised $1.7 million for the group and transformed it (according to the AHA's official history) from a small, underfunded professional society into the powerhouse that it remains today.

After the AHA advised the public to eat less saturated fat and switch to vegetable oils for a "healthy heart" in 1961, Americans changed their diets. Now these oils represent 7% to 8% of all calories in our diet, up from nearly zero in 1900, the biggest increase in consumption of any type of food over the past century.

This shift seemed like a good idea at the time, but it brought many potential health problems in its wake. In those early clinical trials, people on diets high in vegetable oil were found to suffer higher rates not only of cancer but also of gallstones. And, strikingly, they were more likely to die from violent accidents and suicides. Alarmed by these findings, the National Institutes of Health convened researchers several times in the early 1980s to try to explain these "side effects," but they couldn't. (Experts now speculate that certain psychological problems might be related to changes in brain chemistry caused by diet, such as fatty-acid imbalances or the depletion of cholesterol.)

We've also known since the 1940s that when heated, vegetable oils create oxidation products that, in experiments on animals, lead to cirrhosis of the liver and early death. For these reasons, some midcentury chemists warned against the consumption of these oils, but their concerns were allayed by a chemical fix: Oils could be rendered more stable through a process called hydrogenation, which used a catalyst to turn them from oils into solids.

From the 1950s on, these hardened oils became the backbone of the entire food industry, used in cakes, cookies, chips, breads, frostings, fillings, and frozen and fried food. Unfortunately, hydrogenation also produced trans fats, which since the 1970s have been suspected of interfering with basic cellular functioning and were recently condemned by the Food and Drug Administration for their ability to raise our levels of "bad" LDL cholesterol.

Yet paradoxically, the drive to get rid of trans fats has led some restaurants and food manufacturers to return to using regular liquid oils—with the same long-standing oxidation problems. These dangers are especially acute in restaurant fryers, where the oils are heated to high temperatures over long periods.

The past decade of research on these oxidation products has produced a sizable body of evidence showing their dramatic inflammatory and oxidative effects, which implicates them in heart disease and other illnesses such as Alzheimer's. Other newly discovered potential toxins in vegetable oils, called monochloropropane diols and glycidol esters, are now causing concern among health authorities in Europe.

In short, the track record of vegetable oils is highly worrisome—and not remotely what Americans bargained for when they gave up butter and lard.

Cutting back on saturated fat has had especially harmful consequences for women, who, due to hormonal differences, contract heart disease later in life and in a way that is distinct from men. If anything, high total cholesterol levels in women over 50 were found early on to be associated with longer life. This counterintuitive result was first discovered by the famous Framingham study on heart-disease risk factors in 1971 and has since been confirmed by other research.

Since women under 50 rarely get heart disease, the implication is that women of all ages have been worrying about their cholesterol levels needlessly. Yet the Framingham study's findings on women were omitted from the study's conclusions. And less than a decade later, government health officials pushed their advice about fat and cholesterol on all Americans over age 2—based exclusively on data from middle-aged men.

Sticking to these guidelines has meant ignoring growing evidence that women on diets low in saturated fat actually increase their risk of having a heart attack. The "good" HDL cholesterol drops precipitously for women on this diet (it drops for men too, but less so). The sad irony is that women have been especially rigorous about ramping up on their fruits, vegetables and grains, but they now suffer from higher obesity rates than men, and their death rates from heart disease have reached parity.

Seeing the U.S. population grow sicker and fatter while adhering to official dietary guidelines has put nutrition authorities in an awkward position. Recently, the response of many researchers has been to blame "Big Food" for bombarding Americans with sugar-laden products. No doubt these are bad for us, but it is also fair to say that the food industry has simply been responding to the dietary guidelines issued by the AHA and USDA, which have encouraged high-carbohydrate diets and until quite recently said next to nothing about the need to limit sugar.

Indeed, up until 1999, the AHA was still advising Americans to reach for "soft drinks," and in 2001, the group was still recommending snacks of "gum-drops" and "hard candies made primarily with sugar" to avoid fatty foods.

Our half-century effort to cut back on the consumption of meat, eggs and whole-fat dairy has a tragic quality. More than a billion dollars have been spent trying to prove Ancel Keys's hypothesis, but evidence of its benefits has never been produced. It is time to put the saturated-fat hypothesis to bed and to move on to test other possible culprits for our nation's health woes.

(ZH) Voice Recording From Missing Flight MH370 Was Edited

Voice Recording From Missing Flight MH370 Was Edited {http://bit.ly/SlaM4N}

It has been nearly two months since Malaysian Airlines flight MH370 disappeared without a trace on March 8. Since then, despite the endless coverage of CNN, there has been absolutely no progress in uncovering any clues about the fate of the missing Boeing 777. Perhaps the following may provide some clarity on why.

On Thursday, for the first time, 7 minutes of audio recordings of the final conversations between pilots of the missing Malaysian jet and teams of air traffic controllers on the ground were released.

The recording is provided below.



There is one problem: the recordings were "edited" leading many to wonder if the entire conversation wasn't fabricated on a sound stage, and if so: why? And just what is the Malaysian government (either alone or in conjunction with other countries) hiding.

NBC has more:

Analysts who listened to the recordings for NBC News did not know why they were edited, but discovered at least four clear breaks in the audio that indicated edits.
"It's very strange," said audio-video forensic expert and registered investigator Ed Primeau of Primeau Forensics, who has analyzed hundreds of audio recordings. He said the beginning and end of the recording are high-quality with a low noise floor, meaning ambient background noise is almost silent, unlike the middle.
"At approximately 1:14 (a minute, 14 seconds into the audio, which can be heard here), the tone of the recording change to where to me, it sounds like someone is holding a digital recorder up to a speaker, so it's a microphone-to-speaker transfer of that information. That's a pretty big deal because it raises the first red flag about there possibly being some editing," he said.
The next part that raises questions is two minutes, six seconds in, through two minutes, nine seconds in, he said.
"I can hear noise in the room, along with the increase in the noise floor. I can hear a file door being closed, I can hear some papers being shuffled. so I'm further convinced that, beginning at 1:14 continuing through 2:06 to 2:15, it's a digital recorder being held up to a speaker."
Long gaps in the communication throughout the recording also imply some editing, he said.
"But yet, at 6:17, there's a huge edit because the conversation is cut off. It's interrupted. And the tone changes again," he said. "The noise floor, when you're authenticating a recording from a forensic perspective, is a very important part of the process. All of a sudden, we go back to the same quality and extremely low noise floor that we had at the beginning of the recording."
Kent Gibson, a forensic audio examiner with Forensic Audio in Los Angeles, added that there appear to be additional edits at 2:11 and 5:08, and agreed it sounded as though the middle section was recorded with a microphone near a speaker.
"You can hear, at 4:07, pages turning or a person breathing, which is unusual," he said.
While it's not uncommon for the background of a recording to change when a cockpit communication turns over from ground control to air controllers — which happened about four minutes into this recording — that doesn't explain the noises that are heard.
"It's not unusual that there would be clicks when they push the button on the microphone, but it's very unusual to have a disturbance. Normally you wouldn't have any background," Gibson said.
A cut-off word also isn't out of the realm of possibility, he said.
"It wouldn't be unthinkable to have a truncated word because if somebody let go of the trigger on the microphone, it might cut off their word," he said. "But it would be very unusual to find a background differential at the same time, suggesting that Malaysian authorities or whoever presented this made edits for whatever reason."
So why did the authorities fabricate the recording? Simple: the pilot said something the government did not want leaked:

Gibson said it’s possible the tapes could have been edited by Malaysian authorities "if the pilot dropped a hint that they didn't want to get out, if he said something that doesn't fit with the Malaysian government's party line."
But, he said, "It's more likely to be an inadvertent thing. But it's not the way to handle evidence."
The recording also could have come from different sources, he added.
"You can assume that the recording while they're still on the ground came from the tower and then you could assume that the communication with air controllers was while they're in the air," he said. "They may have just mishandled the cobbling of it together."
This doesn't necessarily prove anything about the investigation, he added. "Unfortunately, there are no smoking guns, except there are edits. And there are clear edits," he said.
So no smoking guns, except... there are smoking guns. "There's things that have to do with timelines and radar that they have available, but they don't make them available," said Tom Owen, a consultant for Owen Forensic Services audio analysis and chairman emeritus of the American Board of Recorded Evidence. "They wouldn't give you anything that would be enlightening for the public to any secretive information. I don't see that as a problematic issue."

Considering several hundred people are missing, presumed dead, purposefully covering up critical clues as to what happened is certainly a problematic issue, even if thanks to the government's botched up handling of the situation, it does impart a significant dose of morbid humor to the following advertisement from Malaysian Airlines.

Barron's : The Many Ways to Tap the Water Boom

The Many Ways to Tap the Water Boom
Scarcity means opportunities in everything from pumps and plumbing to sewage treatment.

"A perfect storm is brewing, water is the 21st-century oil," wrote Bank of America Merrill Lynch in a 133-page report last month. BofA calls water scarcity a "global megatrend" and says "investors need to go blue." Credit the bank's conservation efforts; it has been recycling that report for a few years now. Returns for the theme have been just OK. The S&P Global Water index has returned 12.1% on average over the past three years, beating the 9.5% return for the broad S&P Global 1200, but falling short of the 13.9% return for the U.S.-focused Standard & Poor's 500 index.

The opportunity may indeed be more compelling than recent returns suggest. Water infrastructure is crumbling in the U.S., but municipalities have delayed spending to help balance their budgets. That has created enormous pent-up demand for pipes, pumps, and wastewater-treatment gear, and water main breaks are now occurring more frequently from San Francisco to Milwaukee to Springfield, Mass. In emerging markets, growing middle classes are consuming more water-intensive goods like meat, and clamoring for things Americans take for granted, like the ability to draw a clean glass of tap water.

The problem with theme investing, however, is that some key factors that drive stock returns have nothing to do with the themes. Chief among these is valuation; the price an investor pays is easily as important to long-term returns as what he buys. The S&P Global Water index recently traded at 23 times trailing earnings, versus 18 times for the S&P 500. Investors with a thirst for water exposure must be careful not to pay too much. Promising names include Rexnord (ticker: RXN), HD Supply Holdings (HDS), American Water Works (AWK), and two others below.

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Stuart Goldenberg for Barron's
Our blue planet holds plenty of water, but only 2.5% of it is fresh. The amount of fresh water has fallen 35% since 1970, as ground aquifers have been drawn down and wetlands have deteriorated. Meanwhile, demand for water-intensive agriculture and energy is soaring. Overall water demand is on pace to overshoot supply by 40% by 2030. Water scarcity will damp long-term economic growth unless governments spend more to recycle wastewater, turn salt water into fresh, and build smarter plumbing. BofA therefore expects companies that meet these needs to deliver outsize growth for many years.

BUT INVESTORS MUST PAY attention to other factors, too. For example, now is a good time for stock buyers to turn their attention from pumps to plumbing, says Matt Sheldon, manager of the Calvert Global Water fund (CFWAX), which has returned 12.9% a year over the past three years, ranking among the top 2% of natural-resources funds, according to Morningstar. A boom in hydraulic fracturing of oil and gas reserves over the past decade sent demand for pumps soaring, and provided outsize returns for companies like Flowserve (FLS). Its stock price has multiplied 10 times over the past 10 years. But growth there has slowed and shares look fully priced. Flowserve is expected to increase its revenue by less than 4% this year, and its shares go for 19 times this year's earnings forecast.

Meanwhile, a rebound in the U.S. housing market should drive improving results for companies that sell plumbing systems to builders and municipalities. Sheldon likes Rexnord, which makes valves, floodgates, backflow preventers, and other water products. Its revenues are expected to increase by 7% this fiscal year, which runs through March 2015. Its shares go for 16 times earnings.

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HD Supply, an 8% revenue-grower, sells a broad line of building and maintenance supplies, and is seeing particularly brisk growth from its waterworks division. The company, a former unit of Home Depot, went public and swung to a full-year profit last year. Shares go for 20 times this year's earnings forecast, but earnings are still ramping up quickly from a low base. The price/earnings ratio drops to 13 based on next year's forecast and to less than 10 based on 2016. Last August we wrote that shares were poised for 20% upside over the coming year (Aug. 12, "The Home Depot of Commercial Construction"). They're up 11% since then, on par with the S&P 500.

Utilities offer another way into water. American Water Works is the largest investor-owned water and wastewater utility in the U.S., with customers in 40 states. For utilities, aging water infrastructure represents not only a future cost, but a future profit. That's because regulators allow them to invest in infrastructure at handsome returns on equity, and in many states, if realized returns fall behind projected ones, utilities can top them up with customer surcharges. American Water Works is expected to increase its revenue by 7% this year, and shares sell for 19 times this year's earnings estimate. Janney Capital Markets cites the stock as a favorite utility in part because of the potential for stable and rising income. Shares yield 2.7% and management links its payout to earnings, which Janney predicts will grow 7% to 10% a year over the long term.

China represents a top opportunity for water investments in emerging markets, says BofA. In China, all those coal-fired power plants account for 20% of total water consumption, and that figure could rise to 40% over the next decade. Beijing Enterprises Holdings (392.Hong Kong) has a hand in water treatment and sewage, along with toll roads, beer, and gas pipelines. Its shares go for 18 times this year's earnings forecast. That looks inexpensive compared with its projected revenue growth of 16% this year and 21% next year.

EMERGING MARKETS STOCKS aren't the only way to invest in emerging markets, says Andreas Fruschki, manager of the AllianzGI Global Water fund, which ranks among the top 6% of natural resources funds for three-year performance, according to Morningstar. Fruschki's fund has only a 10% stake in companies based in the emerging markets; he prefers to invest in those markets through global companies that sell there. Danaher (DHR) was recently the fund's top holding. It's an acquisition-driven company that focuses on niche markets, and has a hand in water analysis and treatment, test equipment for electronics and medical research, and more. Revenue is expected to grow 5% this year. Danaher shares go for nearly 20 times this year's earnings forecast, but earnings understate the amount of cash the company generates because of charges related to past deals. Shares go for less than 17 times this year's projected free-cash flow.

>>> In June the Japan govt is expected to cut corporate tax rate to 20% from 35%

In June the Japan govt is expected to cut corporate tax rate to 20% from 35% as centerpiece of plan to help companies - Yomiuri
- Among the other business tax breaks being considered are tax incentives to promote investment in start up companies. Angel investors, who currently get to deduct up to Y10M ($98K) from taxable income for startup investments, will be allowed to deduct several times as much.

Barron's : Europe's Revival Stirs Rising Tide of Deals

Europe's Revival Stirs Rising Tide of Deals
The business environment is improving, and that could spur a wave of mergers and acquisitions.

After a few false dawns during Europe's prolonged downturn, mergers and acquisitions are making a comeback.

Conditions are coming together for a pickup in corporate activity. Business confidence is growing and credit is becoming readily available. Earnings show tentative signs of recovery, but low inflation—or deflation—means that managers need to find new ways to grow if they are to meet growth expectations. One solution is M&A.

That doesn't necessarily mean parting with slabs of cash. Some companies are being shrewd and swapping assets, like Novartis (ticker: NOVN.Switzerland) and GlaxoSmithKline (GSK). But others that hoarded cash during the recession now are pondering ways to spend it.

This time, the M&A rebound seems to be for real. From Jan. 1 through April 30, corporate deal making in Europe totaled more than $338 billion, according to Dealogic. That's the highest level since 2008, although still less than half the $682 billion in 2007, just before Lehman Brothers imploded and the euro-zone crisis blew up.

CURIOUSLY, THE TARGETS in the three biggest deals in Europe so far this year are French: cement maker Lafarge (LG.France) is mixing a $41 billion merger with Switzerland's Holcim (HOLN.Switzerland); Vivendi (VIV.France) is selling its telecommunications unit, SFR, to the Netherlands' Altice (ATC.Netherlands) for $24 billion; and General Electric (GE) is buying Alstom's (ALO.France) energy assets for $17 billion, unless the French government intervenes.

M&A activity is good news for equity valuations and can net huge windfalls for shareholders of targeted companies. French stocks are up 3.8% in 2014, outperforming European equities, which are up 2.9%. In contrast, German issues are flat.

The M&A tally could get a massive boost if Pfizer (PFE) succeeds with its bid for AstraZeneca (AZN.United Kingdom), maker of cholesterol treatment Crestor and ulcer drug Losec. Pfizer last week raised its initial offer by 7% to about $106 billion, or £50 ($69.33) a share in cash and stock. However, it may need to increase the cash component from just 32% to convince shareholders to do a deal. AstraZeneca's shares closed Friday £48.08, up 35% since the start of the year, so the upside now appears to be limited if a transaction is to get done.

A lot of buying power is in the hands of U.S. players. GE and Pfizer are among a slate of American companies with substantial assets overseas that likely would be heavily taxed if repatriated. It seems more prudent for those companies to invest those funds outside their home market–and acquisitions are the way to go.

Barclays reckons that U.S. corporations such as Apple (AAPL), Microsoft (MSFT), Procter & Gamble (PG), and PepsiCo (PEP) together have $974 billion in permanently reinvested overseas earnings. More than one-third of that amount is held by technology companies, but big chunks are also evident in health care, staples, and industrials.

EUROPE HAS A PLETHORA of candidates for M&A right now because it remains relatively cheap. That means it is difficult to pinpoint the most likely targets. Pfizer's interest in AstraZeneca has ignited speculation in other pharma stocks, including Shire (SHP.UK), UCB (UCB.Belgium), and Actelion (ATLN.Switzerland), which have attractive pipelines of new products or offer compelling synergies and cost savings.

Reckitt Benckiser (RB.UK) also could find itself the subject of takeover talk. Reckitt, which has a market value of about £35 billion, seemingly has missed out to GSK on Novartis' over-the-counter division and to Merck (MRK) in the race for Bayer's (BAYN.Germany) consumer-health business. That could be enough for predators to start circling. Reckitt boasts a stable of well-known brands from Cillit Bang to Lysol and earned net income of £1.74 billion on revenue of more than £10 billion last year. Its shares closed Friday at £48.40, or about 19 times forecast 2014 earnings.

In the telecom industry, Vodafone (VOD.United Kingdom) in the past six months has picked off cable operators Kabel Deutschland and Spain's Ono. Flush with cash from the sale of its Verizon Wireless stake, it could try to make deeper inroads into European markets by prying Italian provider Fastweb away from Swisscom (SCMN.Switzerland).

Vodafone's ambitions could precipitate responses from rivals. France's Orange (ORA.France) has long been expected to consolidate in Spain and analysts see the likelihood of a bid for Jazztel (JAZ.Spain). But Orange has indicated it is in no hurry and the 44%-run-up in Jazztel's share price this year seems to make a deal less likely, or at the very least reduces the chance of a fat premium.

In France, Bouygues (EN.France), jilted in the race to woo SFR, could seek another partner for its Bouygues Telecom business. Iliad (ILD.France) could be a suitor.

>>> Barron’s summary: positive on RF; Cautious on SUNE

Barron’s summary: positive on RF; Cautious on SUNE

Cover story: India offers potential for investors, and though controversial, Narendra Modi, Indias likely new prime minister, is that nations best shot at an economic turnaround; To avoid problems, investors should focus on themes like infrastructure and Indias rising middle class (Positive on MINDX, EPI, INDY, Bajaj Auto, Gujarat Pipavav Port, ICICI Bank, IDFC, Mahindra & Mahindra, Shriram Transport Finance). 

- Features: 1) Cautious on SUNE: Company has turned around operations by shedding bad businesses and planning a public spinoff of semiconductor wafer factories, but much of the value of a publicly held subsidiary that would own its finished solar projects and pay out cash flow tax-free stems from subsidies, which could be short-lived; 2) Positive on RF: Stock has more than tripled since 2011, and could climb another 30%. Shares trade at just 90% of companys book value, versus an average of 130% for peers; 3) Cautious on AWK, Beijing Enterprises Holdings (392.HK), DHR, HDS, RXN: Companies offer exposure to the growing investment in water infrastructure and shares look cheap, but investors need to look carefully at their valuations and the logic behind them. 

- Tech Trader: Cautious on TWTR, YELP, LNKD, FB: Tiernan Ray says it remains hard for anyone to truly predict what the metrics bode for any company in any quarter in the tech sector, meaning the stocks will continue to be volatile; Recent report from S&P Capital IQ finds investor activism is good for stock prices, but meaningless for building a great business. 

- Trader: Despite the release of mostly positive economic data, particularly on Friday, traders say that escalating tensions in Ukraine are causing investors to hesitate; Positive on HTZ: Spin-off of equipment rental business, which will be known as HERC, should give both newly independent companies a boost; Positive on MUSA: Gasoline retail chain, spun off from MUR, is undervalued, and there are catalysts that could send the stock higher in the next year or so. 

- Small Caps: Positive on HSC: Leading global provider of services to steel makers has seen its turnaround stalled, but if new CEO Nick Grasberger can pull it off, the stock has a bright future. 

- Follow-Up: Negative on TWTR: Companys off-the-charts stock compensation should worry investors because it shows managements willingness to significantly dilute shareholders, which along with a high valuation and slowing growth make the stock one to avoid; Economists at Applied Global Macro Research believe that 4% annual growth in real GDP has already started in the current spring quarter. 

- Mutual Funds: Interview with John Rogers, Jr., portfolio manager, Ariel Fund (top ten holdings: KKR, LAZ, JLL, RCL, CBG, SLCA, WU, BRS, GCI, AXE); Interview with Douglas Chudy and David Dusenbury, portfolio managers, Dalton Greiner Hartman Maher, who say the market is moving in the right direction, presenting opportunities for investors (picks: RF, KS, INGR, ALL); 

- European Trader: Mergers and acquisitions are making a comeback in Europe, which has a large number of candidates because it remains relatively cheap (Positive on Shire, UCB, Actelion, Reckitt Benckiser, Fastweb, Jazztel, Bouygues); 

- Asian Trader: With Korean market down, Jefferies & Co. strategist Sean Darby suggests investors look at preference shares in companies such as Samsung, Hyundai, and LG Chemicals, as well as engineering and construction companies that have seen a pickup in demand from Middle Eastern projects, such as Hyundai Engineering & Construction; 

- Emerging Markets: One reason behind selloff in emerging markets is the growing understanding on the part of investors that these markets operate in more volatile political environments than their developed counterparts do; 

- Commodities: The U.S. is producing the most crude oil in decades and domestic stockpiles are at record highs, but prices still remain steep because of a range of factors; CEO Spotlight: Profile of DD chief Ellen Kullman, who says science and technology will become the companys focus, while its chemical business will soon be out; Other Voices: In opinion piece, Carl Icahn explains why he disagrees with Warren Buffetts decision to abstain from voting on an excessive executive compensation pay proposal at KO, and calls for change in the way boards are chosen and operate; 

- Streetwise: Strategas Research Partners Jason Trennert thinks investors may be better off looking at big, safe stocks such as DE, PFE, and RTN, which could benefit not only from solid earnings growth but from the fact investors may be willing to pay more for them.

FT : Big freeze hits Berkshire profits

Big freeze hits Berkshire profits

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., speaks during a conversation with Brian Moynihan, president and chief executive officer of Bank of America Corp., not pictured, at Georgetown University in Washington, D.C., U.S., on Thursday, Sept. 19, 2013. Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank's ability to profit from bond purchases as it accumulated a balance sheet of more than $3 trillion. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Warren Buffett©Bloomberg
Warren Buffett’s Berkshire Hathaway became the latest company citing the terrible winter among the reasons for a decline in profits in the first quarter, in results released on the eve of its shareholder meeting.
Frigid conditions in the US Midwest caused delays and disruption in shipping cargo by rail, hurting Mr Buffett’s railroad subsidiary, Burlington Northern, the company said on Friday.

Taken together with a decline in profits at Berkshire’s historic reinsurance business and a negative change in the market value of derivatives contracts, it reported a 4 per cent slide in earnings per share.
That did not stop the company’s cash pile swelling by another $1bn to $49bn – giving Mr Buffett yet more firepower for the big acquisitions he says he is still hunting.
The question of whether Berkshire can still find investment opportunities big enough to significantly improve earnings will be on the agenda at Saturday’s annual meeting, where some 38,000 shareholders are expected to converge on the Centurylink Center in downtown Omaha.
Mr Buffett’s preferred measure of investment success for Berkshire, increase in book value, has lagged behind the S&P 500 for more than the past five years. However, it increased 2.6 per cent in the first quarter of the year, according to the latest results, compared to a 1.8 per cent rise in the S&P 500 including dividends.
Live from Omaha

Berkshire Hathaway shareholders are converging on Omaha, Nebraska, for the conglomerate’s annual meeting and the chance to hear from its legendary founder, Warren Buffett. Stephen Foley, the FT’s US investment correspondent, is there to capture the wit, wisdom and, sometimes, wackiness on display.
Click here
Burlington Northern, which Mr Buffett bought for $34bn in 2010, recorded net earnings in the quarter of $724m, down from $798m a year ago, but the company said it expected to rebound to post earnings growth for the year overall.
Partially offsetting the declines in Burlington Northern, the winter weather did boost Berkshire’s utility MidAmerican Energy, as heating demand drove up energy use.
In an interview on CNBC earlier in the day, Mr Buffett said he was not surprised by this week’s weaker-than-expected 0.1 per cent reading on first-quarter GDP in the US.
“We saw in January and February things fairly slow, which certainly in some cases was attributable to weather, in our own case . . . If you have two months out of the three where things really seem to be pretty stagnant, the three months aren’t going to be that good.”
He said the economy had picked up to its end-2013 pace since.
Berkshire’s insurance businesses, where results can be volatile, also recorded declines in the first quarter in both underwriting income and investment returns, while equity derivatives contracts subtracted $132m from earnings in the quarter after having contributed $1.2bn a year ago. Overall, Berkshire’s net income fell to $4.7bn, from $4.9bn a year ago.
Mr Buffett’s operating companies span railways, insurance, energy utilities, retailers, newspapers and diverse industrial businesses, and their growing value has helped spur a rally in Berkshire shares this year. Early on Friday they touched a new record high, but closed down 0.6 per cent at $192,255 per A share, valuing the company at $317bn. The results were released after the market close.