(ZH) This Just Became The Most Important Map In Geopolitics

This Just Became The Most Important Map In Geopolitics

Earlier today, in “Mid-East Melee: Sectarian Showdown Looms As Bahrain Cuts Ties With Iran, UAE Recalls Ambassador,” we brought you the latest from the war-torn Mid-East where a worsening spat between Saudi Arabia and Iran threatens to plunge the region into chaos.

Make no mistake, things were already out of control. The conflict in Syria has mushroomed into a global proxy war, Iraq is struggling to drive Islamic State from key cities, and Yemen remains mired in war nine months after the Saudis entered the fray to drive back the Houthis and restore the Hadi government.

Against that backdrop, the region could have done without the events that unfolded over the weekend. By executing prominent Shiite cleric Nimr al-Nimr, Riyadh has infuriated the Shiite community which took to the streets in protest, even going so far as to firebomb the Saudi embassy in Tehran.

In order to understand the upcoming sectarian strife and in order to fully grasp who belongs to Iran’s sphere of influence and who is loyal to the Saudis, one needs to have a working knowledge of what the Sunni-Shiite split looks like across the region. Because this is set to become the key geopolitical issue in the weeks and months ahead, we thought it an opportune time to present the following map from Goldman which does a nice job of delineating the sectarian split. Note the asterisks which indicate the affiliation of a country’s leadership.

From Goldman

Where are the main sectarian and ethnic divides in the Middle East today? Saudi Arabia and Iran, with their large respective Sunni and Shiite majorities, are generally viewed as two major opposing forces in the Middle East. They lie on opposite sides of an abstract and somewhat contentious demarcation known as the Shiite crescent, an area of Shiite influence stretching from Iran through southern Iraq and into parts of Syria and Lebanon. 

The region’s geopolitical, religious, and sectarian relationships are in reality more dynamic and complex. The conflict in Syria continues to pit anti-government insurgents, including Sunni Islamists, against the Alawite (Shiite) government’s forces and Shiite militias supported by Iran. In Iraq, some Sunnis have felt increasingly disenfranchised under the Shiite-majority government in Baghdad (a relatively new development given Iraq’s long history of Sunni rule). The Islamic State (IS) militant group has exploited this sentiment, particularly in the Sunni-majority areas of northern Iraq. 

How are the different branches of Islam represented in politics? In some countries, such as Saudi Arabia, the rulers adhere to the same branch of Islam as the majority of their citizens. However, this is not always the case. Despite being predominantly Shiite, Iraqis lived under Sunni rulers for much of history, including under the Ottoman Empire and the Ba’thist regime of Saddam Hussein. (Ba’thists are members of the Arab Socialist Ba’th Party, a political party founded in Syria in the 1940s on platforms of Arab nationalism and anti- colonialism. In Iraq, the Ba’thists governed from 1958 until the fall of Saddam Hussein in 2003.) The Iraqi Ba’thist regime was secular in name but reserved political influence for the Sunni elite. In a break from its long history of Sunni political dominance, Iraq is currently ruled by a Shiite-majority government centered in Baghdad. Conversely, in Sunni-majority Syria, members of the Shiite Alawite sect have controlled the government since 1970. 

What is the composition of Sunnis and Shiites in the Muslim world today? Sunnis make up the majority of Muslims worldwide – an estimated 85-90%. Sunnis comprise 85% or more of the Muslim populations in Saudi Arabia, Qatar, Jordan, Syria, and the United Arab Emirates, and 70-85% in Kuwait, Pakistan, and Afghanistan. Shiites comprise the majority in Bahrain, Iraq, and Azerbaijan (all 60-65% Shiite), as well as in Iran (90-95%), home of the largest Shiite population. Although the Middle East and North Africa region is overwhelmingly Muslim (93%), it is home to only around 20% of Muslims worldwide. The majority – over 60% – lives in the Asia-Pacific region. 

Reuters - GM, Lyft set out self-driving car partnership, $500 million investment

GM, Lyft set out self-driving car partnership, $500 million investment


General Motors Inc (GM.N) and Lyft Inc on Monday set out plans to develop an on-demand network of self-driving cars as the U.S. No. 1 automaker announced it would put $500 million into the ride-sharing service's latest $1 billion fund-raising round.

The Detroit-Silicon Valley crossover deal comes as automakers are working out how to respond to the rush of technology companies such as Apple, Alphabet and Uber - Lyft's biggest rival - to control cars of the future and likely reshape the global automotive industry.

The two companies said the partnership, which includes one of GM's largest investments in another company, stemmed from the shared view that self-driving cars will first reach consumers as part of a ride-sharing service, rather than vehicles owned by drivers.

"We think our business and personal mobility will change more in the next five years than the last 50," GM President Dan Ammann said in an interview with Reuters.

The partnership will tap into GM's work on driverless cars and Lyft's software matching drivers and passengers and calculating routes, to create a network of cars that would operate themselves and be available on demand.

The two companies did not set out a timeline for this on-demand network, but said they would immediately offer Lyft drivers short-term rentals of GM cars.

The GM-Lyft announcement came as Toyota Motor Corp (7203.T) and Ford Motor Co (F.N) announced they would adopt the same software to link smartphone apps to vehicle dashboard screens.

Toyota and Ford, two of the world's biggest automakers, invited rival car companies to join them to counter the push by Apple, Alphabet and others into self-driving cars, or what the industry calls autonomous vehicles.

Major automakers are trying to prevent Silicon Valley from dominating the future of autonomous driving and ride-sharing, and are also investing as a way to see whether Lyft and Uber are on the way to making money, said Matthew Stover, automotive analyst with Susquehanna Financial Group.

"The only way to understand the implications and viability of this business model (Lyft and Uber) is to become an investor," said Stover.

Last month, Ford Chief Executive Mark Fields said the No. 2 U.S. automaker would explore the ride-hailing business with a fleet of specially designed Transit vans at its Dearborn, Michigan campus.

GM CEO Mary Barra last fall said that while Apple and Google - now called Alphabet - are pushing to dominate dashboard displays with their software, automakers "have the platform" of the vehicle itself.

GM's Ammann, who will join Lyft's board as a part of the deal, said both companies had a "really common view of the future." Lyft President John Zimmer said the "culture and vision are very alike" in both GM and Lyft.

Lyft said the latest fundraising round included Kingdom Holding Co, the investment firm of Saudi billionaire Prince Alwaleed bin Talal, which invested $100 million.

Other investors included Janus Capital Management, Japanese online retailer Rakuten Inc (4755.T), Chinese ride-hailing service Didi Kuaidi and Chinese Internet company Alibaba Group Holding Ltd (BABA.N).

Kingdom and Alwaleed are major investors in U.S. tech companies. Together they own more than 5 percent of Twitter Inc (TWTR.N).

Lyft said the latest funding round valued it at $5.5 billion, cementing its status as one of Silicon Valley's much-prized 'unicorns,' or companies worth more than $1 billion without going public. Lyft does not publicly disclose its financial performance, but media reports have suggested it is not profitable, like many tech startups.

Lyft is locked in a fundraising race with rival ride-hailing app Uber Technologies Inc [UBER.UL]. Lyft said it has raised a total of $2 billion since August 2013. Uber is reportedly in the midst of a $2.1 billion funding round that would value it as high as $64.6 billion.

>>> US Close Dow-1.58% S&P-1.53% Nasdaq-2.08% Russell-2.40%

Closing Market Summary: Indices Begin the Year Lower 

The stock market ended its first session of 2016 broadly lower, following opening selling pressure that wouldn't ease until the last half hour of trading. The S&P 500 (-1.5%) finished ahead of the Dow Jones Industrial Average (-1.6%) and the Nasdaq (-2.1%), but the benchmark index fell below its 100-day moving average (2024). The major averages stumbled into the open after overseas concerns in China and the Middle East weighed down futures.

The selloff in futures began with weak economic data concerning manufacturing growth in China. Overnight, December's Caixin Manufacturing PMI was reported in at 48.2 versus an expected 48.9. This miss lead to heavy selling in the Shanghai Composite that eventually pushed the index lower by 6.9% before triggering a halt to trading under its circuit breaker provisions. 

In the Middle East, Saudi Arabia suspended diplomatic relations with Iran following a protester-started fire at the Saudi Arabian embassy in Tehran. This unrest followed the execution of a Shiite cleric by the Saudi Arabian government over the weekend. The initial news caused an increase interest in oil, but the commodity was unable to maintain today's advance and WTI crude ended its pit session down 0.8% at $36.76/bbl.

Today's selling was paced by financials (-2.1%), health care (-1.9%), consumer discretionary (-1.8%), materials (-1.7%), and technology (-1.6%) while energy (-0.2%), utilities (-0.3%), and telecom services (-0.5%) outperformed

The financial sector showed relative weakness from the start of the trading session with large cap-components JPMorgan Chase (JPM 63.62, -1.97) and Wells Fargo (WFC 52.91, -1.45) each outpacing the losses in the broader sector with declines of 3.0% and 2.7% respectively. 

Elsewhere, the top-weighted technology sector ended in line with the S&P 500 even though Apple (AAPL 105.35, +0.09) was able to rebound off its session low (102.00), ending higher by 0.1%. In other tech names, Alphabet (GOOGL 759.44, -18.57) was also able to pull off of its low, trimming its loss to 2.4%, while high-beta chipmakers outperformed the broader sector for most of the day. The PHLX Semiconductor Index ended the session lower by 1.1%. 

In the consumer discretionary space, Amazon (AMZN 636.98, -38.91) ended its day near its low following a downgrade at Monness Crespi & Hardt from Buy to Netural. The downgraded cited continued strength in the company but a possibly better entry point to enter or expand a position in the company. 

Today's selloff invited above average participation with more than a billion shares changing hands at the NYSE floor.

Meanwhile in Treasuries, the benchmark note spent the bulk of its day on its high before retreating. The yield on the 10-yr fell three basis points to 2.24%. 

It was a relatively quiet day on the economic front with data being limited to the December ISM Index and Construction Spending:

  • The ISM Index for December declined to 48.2 from 48.6 (consensus 49.0)
  • Construction spending decreased to -0.4% month-over-month growth in November (consensus 0.8%).
    • This release was lower than expected and included a revision from 1.0% to 0.3% month-over-month growth in October.

Investors will not receive any economic data of note tomorrow. 

  • Russell 2000 -2.3% YTD
  • Nasdaq -2.1% YTD
  • Dow Jones -1.6% YTD
  • S&P 500 -1.5% YTD

FT : Deflate stock market and allow China’s fortunes to swell

FT : Deflate stock market and allow China’s fortunes to swell

China should celebrate the collapse of its stock market. That was not the instinct of officials last summer when the Shanghai Composite index lost close to one-third of its value in four short weeks.
Back then, Beijing launched investigations into what it called “malicious short selling” and spent $200bn to prop up falling equity prices. But give the Communist party its due. When one trick stops working, officials are not shy to admit it.
The Shanghai Composite fell 7 per cent on Monday; further falls are likely. Yet we are unlikely to see more of the heavy handed intervention to which officials resorted in 2015. This is not because Beijing does not have the means to prop up the index, but rather because officials have come to believe it desirable for high stock market valuations to be unwound. Large sections of the public are beginning to agree with them.

The most salutary moments in Chinese politics often involve such sharp reversals. It was, after all, the realisation that four decades of central planning had produced only backwardness and starvation that led Beijing to abandon Soviet-style governance in the 1980s.
Since then the country has pursued an industrial policy that has transformed China from an impoverished agrarian backwater into a manufacturing powerhouse that is one of the world’s largest economies. It is a formidable turnround — even if it has consumed vast resources, polluted the environment and yielded less of an improvement in living standards than might have been expected.
In recent years that strategy, too, became untenable, as corporate debts piled up and financial returns diminished. In the meantime, a growing number of local governments were troubled by unsustainable debts.
Things came to a head in 2014 when, with none of the theoretical spinning that usually accompanies a major change of policy in Beijing, officials began to see what they could do to pump up the stock market. The idea was to stimulate the economy without the huge burden of public spending that would come attached to a programme of fiscal stimulus.
The trouble with this approach is that the public foots the bill, not via the tax system, but through the more insidious form of redistribution that occurs when an investor buys shares at a price that has temporarily been inflated by official action. From the beginning, this policy was on questionable moral ground. It was becoming increasingly perilous, too, because the faster the stocks rose, the harder they could fall.
Even after yesterday’s sharp fall, the Shanghai stock market index is more than 40 per cent higher than it was for two years before prices began to take off in late 2014. Shares are likely to fall further. That will be painful for investors. But, outside the financial markets at least, it need not lead to drama.
Realising this, President Xi Jinping is again changing course and has begun touting the virtues of supply-side reform. This looks like a sure sign that Beijing has had its fill of stock market tinkering and is turning instead to a watered-down version of Reaganomics.
The new policy has two major elements. The first involves making it easier for business to operate by eliminating tedious bureaucracy. The second entails giving the private sector a bigger role in public works projects, which in the past have been dominated by notoriously corrupt state-controlled firms.
These are good ideas as far as they go. But the government is showing no sense of urgency, and even if it did, such limited measures are not nearly enough. Tax cuts and privatisation should also be on the agenda.
Still, as the Chinese have discovered on their long journey to prosperity, when you are hungry, half a loaf is better than none.

FT : Tax fraud trial begins in France of art-dealer dynasty

Tax fraud trial begins in France of art-dealer dynasty

One of France’s biggest tax fraud trials began on Monday as members of the Wildenstein art-dealer dynasty faced charges of concealing fortunes from authorities for years.
Investigating judges claim Guy Wildenstein, the Franco-American heir to his family’s estate, along with his deceased brother Alec, hid the bulk of the inherited fortune in funds stretching across multiple tax havens, including the Bahamas and Cayman Islands.

Guy Wildenstein, 70, faces up to 10 years in prison if found guilty, as well as fines in back taxes of more than €550m.
The case is the latest twist to hit a family long-identified with New York’s fine art world, and one that was until recently more associated with respected academic texts on impressionist artists than with public rows over divorces and inheritance.
The two brothers came into the inheritance following the death in 2001 of their father, the art dealer and collector Daniel Wildenstein, who was a French citizen.
Guy Wildenstein took over running the family’s art business, which includes the Wildenstein & Company gallery in Manhattan, while Alec, who died in 2008, ran the dynasty’s horse-racing and breeding business.
The family fortune includes works by artists such as Jean-Honoré Fragonard, as well as a stable of thoroughbred racehorses and a real estate portfolio. The Wildenstein luxury ranch in Kenya also provided the backdrop for parts of the Academy award-winning film Out of Africa.
French prosecutors began an investigation six years ago after Guy and Alec’s stepmother lodged a complaint over their handling of the inheritance. In 2011, Liouba Stoupakova, Alec’s second wife, then raised complaints of her own.
Ms Stoupakova is also on trial together with Alec Wildenstein’s son, also called Alec, two notaries and a lawyer, who are accused of committing or aiding tax fraud or money laundering.
All the defendants deny wrongdoing.
Several years earlier, the elder Alec Wildenstein’s public and noisy divorce from Jocelyne Périsse, known for her extreme cosmetic surgery, had helped attract attention to the Wildenstein dynasty and its wealth.
The year after Daniel’s death, Alec and Guy declared the value of their inheritance to be €40.9m — even though a Vanity Fair profile of the family claimed that Daniel’s wealth was more than $5bn.
In an interview with Paris Match, Guy Wildenstein declared that he was aware that his father had used trusts but was unaware of the details. He described himself at the time as “neither a tax nor a financial specialist”.
He also claimed that French law at the time did not oblige people to declare estate held in the trusts. The trial is expected to last a month.

(BFW) *ATOS SAID TO NEAR $4B DEAL TO BUY DELL'S PEROT SYSTEMS: RE/CODE

http://recode.net/2016/01/04/frances-atos-nears-4-billion-deal-to-buy-dells-perot-systems-unit/

France’s Atos Nears $4 Billion Deal to Buy Dell’s Perot Systems Unit

Computing giant Dell is nearing the end of the process to sell its Perot Systems IT outsourcing services unit in a deal that is expected to exceed $4 billion, sources briefed on the process told Re/code.

Atos, a French IT outsourcing firm with offices in Purchase, N.Y., and Arlington, Texas, is the leading bidder and has offered between $4.2 billion and $4.3 billion for Perot, sources said.

Tata Consultancy Services (TCS), the technology consulting and services arm of of India’s Tata Group, the 147-year old industrial conglomerate, re-engaged Dell in talks late last week and may have made an offer, but walked away from the table today, sources said. TCS ended an earlier round of talks with Dell to buy Perot in mid-December. Dell had hoped to sell the unit for closer to $5 billion.

Two other companies approached by Dell as part of the sale process — New Jersey-based Cognizant Technology Solutions and Japan’s NTT Data — are said to be out of the running. Sources said the situation remains fluid and could still change.

Dell first started shopping the business late last year, before it announced its plan to acquire storage giant EMC. Proceeds from the sale could help Dell pay down some of the $50 billion in debt it has proposed to raise to buy out EMC. Dell and its co-owner, the private equity firm Silver Lake, offered a combination of cash and tracking shares to buy out EMC in a deal valued at $67 billion when it was announced on Oct. 12.

Sources say Dell is hoping to raise as much as $10 billion from the sale of assets it considers no longer core to its business. Among the other assets on the table for a possible sale is Quest Software, which it acquired in 2012. It also filed to take its computer security subsidiary, Secureworks, public in an IPO later this year.

Perot Systems started as an IT services company founded by the billionaire and onetime U.S. presidential candidate Ross Perot. It handles a lot of technology needs for government agencies and health care providers, including helping to process medical claims. Dell acquired it in 2009 for $3.9 billion.

A spokesman for Dell declined to comment. Representatives of Atos and TCS didn’t immediately return messages seeking comment.

>>> Exclusive: Norfolk Southern customers lobby regulator against CP bid

Exclusive: Norfolk Southern customers lobby regulator against CP bid

CHICAGO (Reuters) - Industry groups representing major freight customers of Norfolk Southern Corp have asked the U.S. rail regulator to reject any bid for the railroad by Canadian Pacific Railway Ltd, according to letters viewed by Reuters.

The opposition from a broad array of customers to the hostile bid for the Norfolk, Virginia-based railroad could significantly harm Canadian Pacific's case if an expected lengthy proxy battle is resolved and a merger reaches the Surface Transportation Board for a review.

The Canadian company in mid-November disclosed its $28 billion offer to buy Norfolk Southern. It would be the first merger involving a U.S. railroad since the Surface Transportation Board rewrote the rules in 2001 after a wave of consolidation reduced the number of major North American railroads to seven from 35.

The proposed merger could face a tough review, and the regulator is expected to give customers even more time than in the past to air concerns at public hearings.

Norfolk Southern has rebuffed several bids from Canadian Pacific since November.

The letters have not been made public but copies were viewed by Reuters. Sent in December, they express concerns over Canadian Pacific's plans to cut costs at Norfolk Southern would hurt service levels and that a merger would lead to a continental duopoly meaning higher prices for customers.

Norfolk Southern declined to comment on the letters.

A Canadian Pacific spokesman said the company "is aware of some shipper concerns" but looks forward to discussing the benefits of its bid with all stakeholders.

The documents also include letters from representatives of several state legislatures expressing opposition to the deal.

The letters include a joint one to Canadian Pacific, with the Surface Transportation Board carbon-copied, from the heads of the Alliance of Automobile Manufacturers and the Association of Global Automakers - which between them represent large automakers and suppliers including General Motors Co and Toyota Motor Corp.

A large proportion of finished vehicles travel most of the way by train from U.S. manufacturing plants to dealerships.

"(P)revious rail mergers of this magnitude have been followed by pro-longed periods of poor service levels and higher rates," the joint letter dated Dec. 22 states. "We urge CP to abandon its merger ambitions and to focus its attentions upon enhancing its current levels of customer service."

Major rail mergers in the 1990s, such as the 1999 carve-up of Conrail between Norfolk Southern and CSX Corp resulted in short-term collapses as railroads failed to integrate their networks smoothly.

In a separate letter, Subaru Motor Co said it opposed a merger "as we believe it would limit the competitive balance" among North America's railroads.

The manufacturers' associations of Kentucky, Indiana and West Virginia also wrote to the STB, as did the Michigan Agri-Business Association and the Palmetto AgriBusiness Council (PABC), which represents farmers, banks and agricultural investors in South Carolina.

"We are justifiably concerned that Canadian Pacific’s proposal to slash resources available to the current Norfolk Southern threatens the economy of our state," Charles Higdon, chief executive of the Kentucky Association of Manufacturers, wrote to the STB on Dec. 22.

In a letter dated Dec. 8, Ernie Thrasher, CEO of Xcoal Energy & Resources, wrote he was "concerned that the short-term nature of CP's operating plan would be detrimental to the long-term requirements of the U.S. coal industry and energy sector."

In a Dec. 23 letter to the STB, the head of short line railroad holding company Watco cautioned that many in the rail industry expect the next round of mergers will be the last.

"The proposed CP-NS merger likely would result in a national duopoly, which would dramatically reduce competitive rail options for customers," Watco CEO Rick Webb wrote.