Roche Holding AG Said to be in plans to acquire Polyphor (private) - German press - The purchase of Polyphor is an indication that Roche will begin to return to the antibiotics market. - No details were mentioned however the article did note that the contract would be inked over the weekend.
OGX, Eike, knew since 2012 that reserves could be 82% smaller
A year before the real situation of the company come to the fore, studies done at the request of the board of OGX, Eike Batista, indicated that the major areas of the company's oil in the Campos Basin (RJ) could have reserves equivalent to only 17, 5% of what had been disclosed to the market, documents reveal the oil obtained by Folha.
The pessimistic projections, the result of OGX's technical assessments and confirmed by an external service provider, came to pick a fight within the company and were not made public at the time. The oil company preferred to await the production of some wells.
Report showed impairment in fields
Through a note, OGX said that "the market always kept up to date on production projects, avoiding the dissemination of incomplete information." With debts of U.S. $ 11 billion, the company filed for bankruptcy protection on Wednesday last, with the shares at R $ 0.13.
According to the documents, the reservoir engineers OGX, responsible for determining the extent of the economically viable reserves, indicated in July 2012 that the company could withdraw 315 million barrels of the main areas in Campos - well below the 1.8 billion barrels informed capital market.
A second report, made months later, pointed in the same direction.
Prepared by a group that included Schlumberger, a renowned company in the sector, deepened the evaluation on specific areas, which became fields Sand Shark, Tiger Shark and Shark Cat.
The volume of oil economically viable (recoverable) for these areas was estimated at 43 million barrels, less than the initial assessment of technical OGX (75 million) and the latest information available to the market, at least 1.4 billion barrels.
According to article 157, paragraph 4, of the Law of Corporations, "administrators are required to immediately report that fact could influence investors' decisions."
In paragraph 5, states that "the directors may refuse to provide information if they consider that their disclosure may jeopardize the company's legitimate interests."
"They should have disclosed that there was so much uncertainty about the estimates.'s Trial was correct that should have been left to the investor," says Norma Parente, a former director of the CVM (Brazilian Securities Commission).
La Redoute sale likely within fortnight
La Redoute, the online and mail order sales company due to be sold by French mega retail group Kering, will likely be sold by mid-November, French-language newspaper Journal du Dimanche reported.
Without clear sourcing, the item mooted a mid-November time frame for the sale. This was in the context of this week’s planned demonstration by La Redoute workers against possible job cuts.
Journal du Dimanche noted the same potential buyers of the group as reported earlier - funds OpCapita, HIG or Altarea Cogedim.
In a related item in the same paper, Lille Mayor Martine Aubry expressed unhappiness with developments and noted her team plans to visit the Kering offices in Paris this week to discuss the matter. She also indicated no knowledge of the would-be buyers but expressed concern about what kind of business plan financial buyers might offer and their intentions to meet with local officials or not.
The first item quoted sources close to developments as suggesting the parent company would offer a sweetener to possible buyers in the EUR 300m range.
Source Journal du Dimanche
Ferrovial considers buying Heathrow Airport Holdings out of Glasgow, Aberdeen and Southampton
Heathrow Airport Holdings’ 25% shareholder Ferrovial is considering a buy-out of the company’s Glasgow, Aberdeen and Southampton Airports, Scotland on Sunday reported.
The report did not cite a source for the information but said Heathrow is also currently weighing the sale, which could be worth more than GBP 1bn (EUR 1.2bn) for the three regional hubs.
Heathrow has discussed the potential disposal with advisers, the item reported.
Source Scotland on Sunday
Barron's Saturday Summary: Positive on TMUS, DFS, MDLZ, JCP; Cautious on KO, SHLD, PODD, TWTR
- Cover story: Four experts (Luis Carrillo of JPMorgan, Adam Kutas of Fidelity, Lewis Kaufman of Thornburg, and Jim Carlen of Columbia) discuss Latin America, where stocks are down 20% in the past 18 months, assessing the regions politics, economies, and financial markets to gauge what investors should buy; Four ways to play Latin America include diversified emerging market funds, alternative exchange traded funds, Latin America mutual funds, and stocks.
- Tech Trader: Positive on TMUS: Thanks to merger with MetroPCS, carrier, once seen as a has-been, is now competitive with T, VZ, and a newly-energized S; For investors, company is the only game to play in wireless stocks, according to Craig Moffett of Moffett-Nathanson, who also thinks T may make a bid for VOD as pricing in sector becomes ever more crucial.
- Trader: Cautious KO: At current P/E ratio, shares dont seem cheap, but valuation is the lowest its been in a long time, and with a dividend yield of 2.8%, shares could be good for income-seeking, volatility-averse investors; Cautious on IBM: Tech giant has announced another buyback, which may be a sign of managements lack of imagination for improvement; Cautious on PODD: Wall Street is excited about insulin device makers future, but valuation looks high, especially as the company is a one-trick pony, and a quarterly miss could give stock a jolt.
- Follow-Up: Cautious on SHLD: Sale of five Canadian store leases and potential spin-off of Lands End and Sears Auto Center arent easing doubts about retailers future, and current investor optimism seems misplaced; Positive on BK: Chief Gerald Hassells strong operating skills are evident in banks recent gains, and although shares are pricier than last year, they remain cheap; Positive on ELY: Shares are higher as turnaround under CEO Chip Brewer takes hold, and they are likely to see more upside ahead.
Features: 1) Cautious on TWTR: Microblogger could be a good investment at an expected offering price of $20, but paying more admits to a valuation of company that is hard to justify. 2) Positive on DFS: Credit card company may seem like an also-ran compared with V and MA, but investors should look at its big drivers--smart lending and new banking products, and at its ability to keep risk in check. 3) Positive on MDLZ, JCP, BA, Hitachi, ACAS: Companies were among the top picks of investors at the fifth annual Invest for Kids Investment Conference in Chicago, while fund professionals at the Sohn London Investment Conference liked TTM, DCC, Salvatore Ferragamo, Nordea Bank, Aurizon Holdings, and Experian.
- Small Caps: Positive on CVA: Waste company that converts garbage to energy is in an industry with high barriers to entry, which should keep competitors at bay and keep its own operation growing; with shares down, now is a buying opportunity.
- Mutual Funds: Interview with Don Kilbride, Portfolio Manager, Vanguard Dividend Growth Fund, who prefers companies that regularly increase dividends (top ten holdings: MCD, MSFT, UPS, WMT, IBM, MRK, TGT, PX, Roche Holding, JNJ); Interview with Donald Yacktman, President, Yacktman Asset Management, who says that on a risk-adjusted long-term basis, PEP, PG, and KO look like undervalued AAA bonds."
-European Trader: Positive on Compagnie Financiere Richemont: Luxury goods maker is under pressure in China, but because it wields substantial pricing power and its innovative design and manufacturing create high barriers to competition, the long-term outlook is bright.
- Asian Trader: Investors can make a profit in Hong Kong housing, but the market swings wildly, so timing is crucial (Cautious on Sun Hung Kai Properties, New World Holdings, Cheung Kong Holdings, Hutchison Whampoa).
- Emerging Markets: Both Brazil and Mexico have consumer-driven economies, but beyond that are very different; some people think Mexicos recent gains will flatten out, while others see it as a new power; observers say the best deals in both countries are to be found in smaller companies and the funds that hold them (Positive on TEMRX, Linx, Iochpe-Maxion, EWW).
- Commodities: Rally in sugar is crumbling, and a turnaround in prices is likely in 2014, but the rest of this year could attract the sugar bears, and investors taking advantage of falling prices can find some deals.
- CEO Spotlight: Profile of VZ chief Lowell McAdam, who is deeply involved in the nuts and bolts of the telecoms business, and is fond of making surprise visits to stores to check on the way they are run.
NSA Cloud Could Give AT&T Cover Move Into Europe Comes With Significant Risks
Out of adversity comes opportunity. That may be something AT&T T +0.11% should remember.
Outcry in Europe over spying by the National Security Agency has prompted officials in the region to threaten intense scrutiny of any AT&T deal to acquire a major wireless carrier there. That could frustrate AT&T's apparent aim of bidding for the remaining piece of Vodafone Group VOD.LN +3.56% after the deal to sell its stake in Verizon Wireless to Verizon Communications VZ -0.04% closes in the first quarter of 2014.
If AT&T is forced to back away because of a chill political wind, that might not be such a bad thing. A move to Europe carries significant risks, in large part because of the region's stifling regulatory climate and fiercely competitive landscape. Those factors could prevent AT&T from generating a sufficient return on investments in wireless networks there, a likely component of its European strategy.
Having another big deal scuttled by regulators after the Justice Department blocked its bid for T-Mobile US TMUS +0.58% in 2011 also could be disastrous for AT&T. Blaming the NSA blowup could be a convenient way to avoid even a chance of that.
Of course, it may already be too late to turn back, particularly after AT&T has spent so much effort promoting the idea to investors. It arguably needs to do a deal to help it combat mounting competition in the U.S. wireless market.
And AT&T already has publicly ruled out a domestic merger, citing the difficult U.S. regulatory climate. The company may be counting on the spying scandal quickly fading from the headlines and on being able to appease regulators by agreeing to wall off its European business in some way.
Still, it might be better for investors if AT&T uses the government's misstep as a chance to avoid one of its own.
Lost Picasso, Matisse, 1,500 Other Works Found in Munich
German customs authorities confiscated ~1,500 paintings in a Munich apartment in early 2011 that had been thought lost, Focus reports, without saying how it got information. * At least 300 are works confiscated by Nazis after they designated them "degenerate art" during Third Reich: Focus * Paintings also include works of Chagall, Nolde, Beckmann,Marc, Kirchner, Liebermann: Focus
Hailstorms dent Berkshire profits
Hailstorms across parts of Europe over the summer put a dent in profits at Warren Buffett’s conglomerate Berkshire Hathaway. The company’s reinsurance businesses posted earnings for the third quarter that disappointed analysts, and highlighted their sensitivity to extreme weather and other catastrophes. The series of hailstorms and floods in Europe have caused a cumulative loss of $425m, Berkshire Hathaway said on Friday, contributing to the company’s overall earnings per share missing analyst expectations. Berkshire Hathaway cautioned that reinsurance profits were volatile from quarter to quarter. The reinsurance market is where traditional insurers sell parts of the risk that they have covered. Weak results from Berkshire Hathaway Re and General Re, Mr Buffett’s two reinsurance businesses, come at a time of weakening reinsurance premiums in some markets. "In some markets competition is increasing and pricing could be coming under pressure," said Tom Lewandowski, analyst at Edward Jones, "and that may be why we are seeing results come in a bit weaker than expected, but the business is lumpy and difficult to predict." Berkshire Hathaway’s insurance divisions, which include the traditional insurer Geico, recorded third-quarter earnings of $1.34bn, down from $1.58bn in the same period last year. However, the company’s overall results were buoyed by $1.39bn in gains on derivatives contracts, whose fluctuating market value has to be recorded in the accounts even though the contracts do not mature for several years. Net earnings were $5.05bn, up from $3.92bn in the third quarter of 2012, representing an 8.3 per cent increase in operating earnings per share. Operating EPS of $2,228 compared to the consensus of analysts’ estimates of $2,402. There were improvements elsewhere across the sprawling conglomerate, which Mr Buffett has assembled since taking control of the company in 1965. Burlington Northern, which operates one of North America’s largest railroads, earned $1.55bn in the quarter, up from $1.51bn thanks to increased demand for transporting coal. The demand for coal has risen as alternative natural gas has become more expensive. There were also better than expected results from manufacturing and retail businesses, and from Clayton Homes, its manufacturer of mobile homes, which doubled profits. Marmon, the manufacturing subsidiary, agreed last month to pay $1.1bn in cash for two units of IMI, the UK engineering group, including its drinks dispenser division that supplies Coca-Cola, PepsiCo and McDonald’s. Berkshire Hathaway shares have traded sideways since July, but are up 29 per cent this year. They fell 0.4 per cent in after-hours trading on Friday, following publication of results.
Buffett's $40B cash pile provides fuel for next takeover
NEW YORK • Warren Buffett, who aims to have $20 billion in cash at his Berkshire Hathaway, isn’t investing fast enough to keep money from piling up. Berkshire on Friday posted a $5.05 billion third-quarter profit, a 28 percent increase over the year-earlier quarter, adding to a cash hoard of $35.7 billion at the end of June. The billionaire investor also got back $4.4 billion this month that was lent to help Mars Inc. buy Wm. Wrigley Jr. Co. in 2008. Even in a year in which Omaha, Neb.-based Berkshire Hathaway has struck some of its largest deals and accelerated capital spending, Buffett still needs to find acquisitions. Berkshire has already invested $12.3 billion on a takeover of HJ Heinz Co., committed $5.6 billion to buy a Nevada electric utility and made smaller purchases through subsidiaries since Dec. 31. "It’s a high-class problem," said Cliff Gallant, an analyst at Nomura Holdings Inc. "The year’s not up. I wouldn’t be surprised to see another deal of some sort." Buffett, Berkshire’s chairman and chief executive officer for more than four decades, has said he likes to keep $20 billion on hand should the reinsurance operations need to pay large claims. Having additional cash allows him to make big investments when others are fearful. Buffett’s 2008 deals with companies including Mars, Dow Chemical Co., Goldman Sachs Group Inc. and General Electric Co. allowed him to put large amounts of money to work, earn high interest rates and, in some cases, get warrants to buy equity. The cash pile climbed as high as $49.1 billion on March 31, before falling in the second quarter after the Heinz deal. Berkshire had about $40 billion on hand, Buffett told CNBC on Oct. 16. He didn’t return a message seeking comment about his plans for the funds. Keeping ample liquidity has come at a price. Most of Berkshire’s cash is in Treasuries, which have generated little interest income as the Federal Reserve kept rates low to help stimulate the economy. "The $20 billion-plus of cash-equivalent assets that we customarily hold is earning a pittance at present," Buffett wrote in a 2010 letter to investors. "But we sleep well." Berkshire now has enough cash for a $15 billion acquisition, counting proceeds from Mars and commitments to buy businesses, the analysts wrote in a note on Oct. 4. Since then, Berkshire’s Marmon unit agreed to buy a beverage dispenser business from IMI PLC for $1.1 billion. Buffett, 83, has passed on some opportunities to draw down his cash pile this year. Deals with Goldman Sachs and GE in 2008 enabled him to buy a combined $8 billion in the companies’ stock at below-market prices. Instead, he settled the contracts this month in cashless transactions that gave him smaller stakes. Exercising his full option to buy Goldman Sachs shares would have made the holding one of the largest in Berkshire’s stock portfolio, which was valued at more than $100 billion at the end of June. Buffett has said he’d rather focus on his biggest equity investments: Wells Fargo & Co., International Business Machines Corp., American Express Co. and Coca-Cola Co. "Otherwise, we would have been putting a great many billions of dollars in," he said of Goldman Sachs in the interview with Liu. "That’s not an investment that we anticipate being in our big four, but it’s an investment we’re happy to have." The wind-down of Buffett’s crisis-era wagers has put a dent in investment income. Mars repaid bonds that carried an 11.45 percent coupon, and Goldman Sachs and GE each paid 10 percent dividends on the funds Buffett provided. Both companies redeemed Berkshire’s stake in 2011. The Heinz purchase replaces some of that revenue. In addition to getting half the equity in the world’s largest ketchup maker, Berkshire invested $8 billion to get preferred shares that pay $720 million in dividends a year. Buffett’s firm has more than 80 units that operate airplanes and power plants, manufacture bricks and chemicals, and sell products from chocolate to running shoes. Together, they helped generate a record $9.4 billion profit in the first six months of the year. "The cash-flow generation at Berkshire right now is immense," said Meyer Shields, an analyst at Keefe, Bruyette & Woods. "Eventually, there will be something to buy, and he’ll have the cash on hand to buy it."
The 10% Solution
Governments need more money, and the top tenth of households, measured by assets, has a lot of it. Next stop: a wealth tax.
Is this the Red Sox rally? With Boston a major hub of money managers and Connecticut the home to more than a few big hedge funds, euphoria swept through New England as the Sox took the World Series last week.
There were probably more than a few aching heads at trading desks around the region Thursday from celebrations the night before when New Englanders' beloved "Sawx" clinched at home in Fenway for the first time since 1918. Whatever the cause, Woody Dorsey reported that day from his home base in Vermont, his Market Semiotics polling had hit a 98% bullish reading on stocks.
Still, it's hard to pin the market's continued levitation on the euphoria in Red Sox Nation. Even before they nailed down the series in six games over the St. Louis Cardinals, BlackRock Chief Executive Larry Fink was warning of an "overzealous" market, which was mirrored in an array of sentiment indicators.
In particular, more than half of those surveyed by Investors Intelligence professed to be bullish, some 52.6% to be exact, which is still short of the heady levels of around 60% that have tended to coincide with market peaks. But bears receded to a mere 16.5%, about as low as it gets.
Taken together, the ratio of Investors Intelligence bulls to bears tracked by Yardeni Research is at a relatively frothy level of three-to-one, which was last breached before the 2011 correction, and prior to other pullbacks in the past decade. In addition, Citigroup's Panic/Euphoria gauge—which it dubs as "the other P/E"—clocked in at its most euphoric since 2008, which, if memory serves, saw a rather nasty episode in the market. That's corroborated by heavy flows into equity mutual funds—up big three weeks in a row, with $12.4 billion in the latest week, bringing the 2013 tally to $231 billion. All of which leads Bank of America Merrill Lynch's chief investment strategist, Michael Hartnett, to exclaim: "It's getting frothy, man!" in a research note.
The P/E usually referred to—the price-to-earnings ratio—is right in line with historical averages, writes Barry Knapp, chief strategist at Barclays, in his latest market missive. At 16.2 times trailing 12-month earnings, the market multiple is right in line with the median since 1946 at the middle of market cycles and close to the average of 15.9 times. Earnings gains, however, distinctly trail what was seen in those periods. He puts trailing 12-month earnings-per-share growth at 4.6%, well short of the median of 12.7% and the average of 13.3% at midcycle.
Which raises a question: Is the rally being driven by earnings expectations or improving outlooks for fiscal and monetary policies and the economy? Knapp thinks it's pretty clear it's the latter. In other words, with the market trading at an average P/E and below-average earnings growth, it's dependent upon policy. And like the Fed's quantitative easing, favorable policy can't go on forever, so something's got to give.
At last week's Federal Open Market Committee meeting, the policy-setting panel gave no indication of any change in stance or acknowledgment of the cooling in the economy, especially the slowing in the growth in payrolls. While the October employment report was delayed a week to this Friday by last month's government shutdown, ADP's estimate of private payroll expansion was a below-consensus 130,000. Moreover, the three-month average of official Bureau of Labor Statistics private payroll count has slowed to 150,000 from more than 200,000 at the beginning of the year, notes Shadow Government Statistics.
With the market dependent on the Fed, and the Fed saying its course depends on the data, the jobs numbers will take center stage. The consensus guess is for a 130,000 increase in nonfarm payrolls and perhaps a slight uptick in the jobless rate, although the government shutdown could distort the numbers. The first stab at third-quarter gross domestic product, due Thursday, also is likely to show a tepid 2% rate of gain, down from 2.5% in the previous quarter. None of which should induce the Fed to taper its $85 billion-a-month bond purchases before next spring.
WHETHER WILLIE SUTTON REALLY said he robbed banks because that's where the money is, his purported quip is as apt as ever. Governments looking for money are going where the dough is—rich folks.
Democrat Bill de Blasio is all but certain to be elected the next mayor of New York City on Tuesday on a plank to hike income taxes on Gothamites earning over $500,000 to fund early education and after-school projects. The odds of getting that levy enacted are rather longer because it's up to the New York State Legislature in Albany, not the New York City Council, for reasons not worth delving into here.
Still, the proposal is in line with recent increases in taxes on high earners, from the hikes at the federal level, including raising the top bracket to 39.6% and ramping up levies on investment income such as dividends and capital gains, to California's Proposition 30, which boosted top tax brackets to fund education.
In his weekly New York Times column on Oct. 26, James B. Stewart suggested that the plan to tax New York's rich "could aim higher." Folks who live and work in the Big Apple and earn more than $500,000 a year already face high federal, state, and local income taxes, plus property taxes, he pointed out. To which it might be added that, given the area's exorbitant cost of everything, especially housing, the half-million that would let you live like a king or queen most anywhere else doesn't go that far, especially in Manhattan.
But, Stewart continues, New York City residents, by and large, aren't the ones buying trophy apartments priced in the sky. They are "the ultrawealthy with a primary residence elsewhere, for whom a $55 million condo is a pied-à-terre and just another place to park their wealth." And the property taxes are relatively trivial, given the low assessed valuations—including an $88 million condo purchased by a Russian billionaire, on which taxes were just $59,000 last year. That's less than the property taxes on homes worth a tenth as much in some New York area suburbs.
The owners of these posh pads don't pay New York City income taxes if they spend more than 183 days a year outside of the city. And foreign residents who stay out of the country for 183 days owe no U.S. income taxes, he adds. Stewart proposes raising taxes on these wealthy transients. After all, if they're willing to pay exorbitant prices for flats that sit empty all but a few days a year, it's unlikely that they'll care about kicking in a few more thousands to the city's coffers. That's a small price to pay for a safe-harbor asset beyond the reach of mercurial dictators, especially with the property likely to more than maintain its value in real terms.
The International Monetary Fund offered its own immodest proposal to tax wealth, whether on property, transfers of property, financial transactions, or other assets. The IMF's Fiscal Monitor (kindly passed along by John Brady, rates maven at Chicago futures specialist RJ O'Brien & Associates) suggests that wealth actually is a better measure of the ability to pay than income. While the top 10% of earners own more than half of the wealth in major industrialized countries, and over 75% in the U.S., the take from income levies has fallen in recent years, to under 2% of gross domestic product on average in those nations.
So, the IMF sees scope to hike wealth taxes. Property taxes are the cornerstone of many U.S. localities, but could be increased outside of Anglo-Saxon nations. Transaction taxes can be "administratively appealing," because governments can track them readily, but could impede beneficial trades. Transaction levies are often proposed to reduce price volatility—the "Tobin tax" on currencies was meant to damp exchange-rate swings—but might actually lead to thinner, less efficient markets, the IMF publication observes. Estate taxes, meanwhile, yield relatively little because of low rates and exemptions, but could be expanded.
Finally, taxes on net wealth could be added, perhaps in addition to capital-gains levies, which may be low or easily evaded. One study suggests that a 1% tax on net wealth of the top 10% of households could raise 1% of GDP per year. So, readers of Penta—which is aimed at those with assets of at least $5 million—presumably would write a check for an additional $50,000 or more under such a scheme. It might be a one-time hit to reduce debt—or it could be ongoing. The IMF admits that the modern history of such levies, especially on estates, isn't encouraging, given relief and exemptions for, say, land or family-owned businesses. Financial wealth, moreover, is mobile, so it would be better to lean more heavily on nonfinancial assets, which the organization says are very important for the ultrawealthy.
"Although these initiatives face difficulties that should not be underestimated, over the longer term they have the potential to make much fairer tax systems," the IMF publication concludes.
Whether you agree that such levies would increase fairness to correct growing inequality, or think that such redistribution takes away from the productive private sector to fund bloated government spending, don't be surprised if Penta readers are among the targets. Regardless of one's philosophical viewpoint, governments have deficits to close, and wealth is where the money is.