TheChek News Flow

Leading shareholders at MSCI are urging the company to consider breaking itself up and putting its famous stock market indices business on the auction block.

The extent of a rift between the company’s management and ValueAct, an activist hedge fund which has taken an 8.3 per cent stake, goes beyond the question of whether ValueAct should be given a board seat, according to people familiar with the situation.

MSCI rejected ValueAct’s request for boardroom representation because the fund is encouraging the company to split its indices operations from more recently acquired portfolio management software businesses.

People close to the discussions say ValueAct believes the indices business could be attractive to a strategic buyer, since stock exchanges are aggressively pushing into indexing.

Earlier this week, Nasdaq paid $225m for Dorsey Wright, a US index provider and analytics group, and last year the London Stock Exchange outbid MSCI for the Russell family of stock indices in a $2.7bn deal.

There is more than $9tn benchmarked against MSCI indices globally, the company says.

At least one other major shareholder, a London-based value investor called Independent Franchise Partners, shares ValueAct’s belief that the company would be better broken up, according to people familiar with its thinking. Independent Franchise has an 8.6 per cent stake in MSCI.

A third leading shareholder is backing ValueAct’s push for board representation, although it has not yet taken a view on whether the company should be broken up.

“ValueAct have a good track record of being constructive board members,” the shareholder said. “At MSCI, there are questions on whether a longstanding management is wedded to a strategy that doesn’t make sense, and ValueAct are very thoughtful about the questions they ask.”

MSCI has already started building up its defences against the break-up calls, hiring public relations specialists and strengthening its team of bankers to include those expert in responding to activist funds.

Jeff Ubben, founder of ValueAct, went public earlier this week with a letter criticising MSCI management for failing to properly consider putting a ValueAct representative on the board.

In it, he questioned the company’s strategy of tightly integrating portfolio analytics and risk analytics software businesses into the core indexing operations, but did not go further in setting out proposals for structural reform.

MSCI, led by chairman and chief executive Henry Fernandez, has been promising to increase investment in the software businesses, and to return $1bn in capital to shareholders by the end of 2016.

In their discussion of monetary policy for the period ahead, members judged that information received since the FOMC met in October indicated that economic activity was expanding at a moderate pace. Labor market conditions had improved further, with solid job gains and a lower unemployment rate; taken as a whole, labor market indicators suggested that the underutilization of labor resources was continuing to diminish. Household spending was rising moderately and business fixed investment was advancing, while the recovery in the housing sector remained slow. Inflation had continued to run below the Committee's longer-run objective, in part reflecting declines in energy prices. Market-based measures of inflation compensation had declined somewhat further, but survey-based measures of longer-term inflation expectations had remained stable. The Committee expected that, with appropriate monetary policy accommodation, economic activity would continue to expand at a moderate pace, with labor market indicators moving toward levels the Committee judges consistent with its dual mandate. The Committee also expected that inflation would rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate.

In their discussion of language for the postmeeting statement, members generally agreed that they should acknowledge the broad improvement in labor market conditions over the intermeeting period as well as their judgment that labor market slack continued to diminish. In addition, they decided that the statement should note that the low level of inflation seen of late partly reflected the recent decline in energy prices. The Committee modified the previous statement language to make clear that it expects that inflation will rise gradually toward 2 percent as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. Given the uncertainties about the outlook for inflation, members decided that it would be appropriate to indicate that the Committee continues to monitor inflation developments closely.. 

Most members agreed to update the Committee's forward guidance with language indicating that it judges that it can be patient in beginning to normalize the stance of monetary policy. In order to avoid the misinterpretation that this new wording reflected a change in the Committee's policy intentions, the statement included a sentence indicating that the Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. Two members thought that this forward guidance did not take sufficient account of the progress that had been made toward the Committee's objectives, while one wanted to strengthen the forward guidance in order to underscore the Committee's commitment to its 2 percent inflation objective. Members agreed that their policy decisions would remain data dependent, and they continued to include wording in the statement noting that if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate would likely occur sooner than currently anticipated, and, similarly, that if progress proves slower than expected, then increases in the target range would likely occur later than currently anticipated. The Committee decided to maintain its policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. Finally, the Committee also decided to reiterate its expectation that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive

{http://www.memri.org/report/en/0/0/0/0/0/0/8206.htm}

In an essay published October 3, 2014 in the French newspaper Marianne, French Muslim philosopher Abdennour Bidar, author of Self Islam: A Personal History of Islam (Seuil, 2006); Islam without Submission: Muslim Existentialism (Albin Michel, 2008), and A History of Humanism in the West (Armand Colin, 2014), wrote that Muslims cannot make do with denouncing and repudiating terrorist barbarism, but must acknowledge that its roots lie within Muslim society, and especially within the Islam that is prevalent in the Arab world today. He points out that Islam, like all religions, has throughout its history been a source of much good, wisdom and enlightenment, but that today's mainstream Islam rejects the freedom and flexibility that are advocated by the Koran and instead promotes rigidity and regression that ultimately give rise to terrorism. The Muslim world, he concludes, must therefore reform itself, and especially its education systems, based on principles of freedom of religion and thought, equality, and respect for the other.

The following are translated excerpts from his essay:

"I See That You Are Losing Yourself And Your Dignity, And Wasting Your Time, In Your Refusal To Recognize That This Monster Is Born Of You"

"Dear Muslim world: I am one of your estranged sons, who views you from without and from afar – from France, where so many of your children live today. I look at you with the harsh eyes of a philosopher, nourished from infancy on tasawwuf (Sufism) and Western thought. I therefore look at you from my position of barzakh, from an isthmus between the two seas of the East and the West.

"And what do I see? What do I see better than others, precisely because I see you from afar, from a distance? I see you in a state of misery and suffering that saddens me to no end, but which makes my philosopher's judgment even harsher, because I see you in the process of birthing a monster that presumes to call itself the Islamic State, and which some prefer to call by a demon's name – Da'esh. But worst of all is that I see that you are losing yourself and your dignity, and wasting your time, in your refusal to recognize that this monster is born of you: of your irresoluteness, your contradictions, your being torn between past and present, and your perpetual inability to find your place in human civilization.

"What do you [Muslims] say when faced with this monster? You shout, 'That's not me!' 'That's not Islam!' You reject [the possibility] that this monster's crimes are committed in your name (#NotInMyName). You rebel against the monster's hijacking of your identity, and of course you are right to do so. It is essential that you proclaim to the world, loud and clear, that Islam condemns barbarity. But this is absolutely not enough! For you are taking refuge in your self-defense reflex, without realizing it, and above all without undertaking any self-criticism. You become indignant and are satisfied with that – but you are missing an historical opportunity to question yourself. Instead of taking responsibility for yourself, you accuse others, [saying]: 'You Westerners, and all you enemies of Islam, stop associating us with this monster! Terrorism is not Islam! The true Islam, the good Islam, doesn't mean war, it means peace!'"

"The Root Of This Evil That Today Steals Your Face Is Within Yourself; The Monster Emerged From Within You"

"Oh my dear Muslim world, I hear the cry of rebellion rising within you, and I understand it. Yes, you are right: Like every one of the great sacred inspirations in the world, Islam has, throughout its history, created beauty, justice, meaning and good, and it has [been a source of] powerful enlightenment for humans on the mysterious path of existence... Here in the West, I fight, in all my books, [to make sure that] this wisdom of Islam and of all religions is not forgotten or despised. But because of my distance [from the Muslim world], I can see what you cannot... and this inspires me to ask: Why has this monster stolen your face? Why has this despicable monster chosen your face and not another? The truth is that behind this monster hides a huge problem, one you do not seem ready to confront. Yet in the end you will have to find the courage [to do so]...

"Where do the crimes of this so-called 'Islamic State' come from? I'll tell you, my friend, and it will not make you happy, but it is my duty as a philosopher [to tell you]. The root of this evil that today steals your face is within yourself; the monster emerged from within you. And other monsters, some even worse, will emerge as well, as long as you refuse to acknowledge your sickness and to finally tackle the root of this evil!

"Even Western intellectuals have difficulty seeing this. For the most part they have forgotten the power of religion – for good and for evil, over life and over death – to the extent that they tell me, 'No, the problem of the Muslim world is not Islam, not the religion, but rather politics, history, economics, etc.' They completely forget that religion may be the core of the reactor of human civilization, and that tomorrow the future of humanity will depend not only on a resolution to the financial crisis, but also, and much more essentially, on a resolution to the unprecedented spiritual crisis that is affecting all of mankind."

"I See In You, Oh Muslim World, Great Forces Ready To Rise Up And Contribute To This Global Effort To Find A Spiritual Life For The 21st Century"

"Will we be able to come together, across the world, and face this fundamental challenge? The spiritual nature of man abhors a vacuum, and if it finds nothing new with which to fill the vacuum, tomorrow it will fill it with religions that are less and less adapted to the present, and which, like Islam today, will [also] begin producing monsters.

"I see in you, oh Muslim world, great forces ready to rise up and contribute to this global effort to find a spiritual life for the 21st century. Despite the severity of your sickness, you have within you a great multitude of men and women who are willing to reform Islam, to reinvent its genius beyond its historical forms, and to be part of the total renewal of the relationship that mankind once had with its gods. It is to all those who dream together of a spiritual revolution, both Muslims and non-Muslims, that I have addressed my books, and to whom I offer, with my philosopher's words, confidence in that which their hope glimpses."

"Forward-Looking Muslims Understand All Too Well That Al-Qaeda, Jabhat Al-Nusra, AQIM, And The Islamic State Are Only The Most Visible Symptoms Of An Immense Diseased Body"

"But these Muslim men and women who look to the future are not yet sufficiently numerous, nor is their word sufficiently powerful. All of them, whose clarity and courage I welcome, have plainly seen that it is the Muslim world's general state of profound sickness that explains the birth of terrorist monsters with names like Al-Qaeda, Jabhat Al-Nusra, AQIM, and Islamic State. They understand all too well that these are only the most visible symptoms of an immense diseased body, whose chronic maladies include the inability to establish sustainable democracies that recognize freedom of conscience vis-à-vis religious dogmas as a moral and political right; chronic difficulties in improving women's status...; the inability to sufficiently free political power from its control by religious authority; and the inability to promote respectful, tolerant and genuine recognition of religious pluralism and religious minorities."

"Could All This Be The Fault Of The West? How Much Precious Time Will You Lose, Dear Muslim World, With This Stupid Accusation[?]"

"Could all this be the fault of the West? How much precious time will you lose, dear Muslim world, with this stupid accusation that you yourself no longer believe, and behind which you hide so that you can continue to lie to yourself?

"Particularly since the eighteenth century – it's past time you acknowledged it – you have been unable to meet the challenge of the West. You have childishly and embarrassingly sought refuge in the past, with the obscurantist Wahhabism regression that continues to wreak havoc almost everywhere within your borders – the Wahhabism that you spread from your holy places in Saudi Arabia like a cancer originating from your very heart. In other ways, you emulated the worst [aspects] of the West – with nationalism and a modernism that caricatures modernity. I refer here especially to the technological development, so inconsistent with the religious archaism, that makes your fabulously wealthy Gulf 'elite' mere willing victims of the global disease – the worship of the god Money.

"What is admirable about you today, my friend? What do you still have that is worthy of the respect of the peoples and civilizations of the world? Where are your wise men? Have you still wisdom to offer the world? Where are your great men? Who is your Mandela, your Gandhi, your Aung San Suu Kyi? Where are your great thinkers whose books should be read worldwide, as they were when Arab or Persian mathematicians and philosophers were spoken of from India to Spain? You are actually so weakened behind [the mask of] self-confidence that you always display... You have no idea who you are or where you want to go, and it makes you as unhappy as you are aggressive... You persist in not listening to those who call on you to change by finally freeing yourself from the dominion that you have granted to religion over all [aspects of] life.

"You chose to consider Muhammad a prophet and king. You chose to define Islam as a moral, political, and social religion that must rule as a tyrant in the state as well as in civilian life, in the street and in the home, and in every man's conscience. You chose to believe that Islam means 'submission' and to impose that belief – while the Koran itself declares that 'there is no compulsion in religion'... You have made [the Koran's] cry for freedom into the reign of coercion. How can a civilization so betray its own sacred text? I say that, in Islamic civilization, the time has come to institute this spiritual freedom – the most sublime and difficult of all [freedoms] – in place of all the laws invented by generations of theologians!"

"Numerous Voices That You Refuse To Hear Are Rising Today In The Ummah To Denounce This Authoritarian Religion That Cannot Be Questioned"

"Numerous voices that you refuse to hear are rising today in the ummah [Islamic nation] to denounce this authoritarian religion that cannot be questioned... Many believers have so internalized the culture of submission to tradition and to the 'masters of religion' (imams, muftis, sheikhs etc.) that they don't understand us when we talk to them about spiritual freedom or personal choice vis-à-vis the 'pillars' of Islam. This is a 'red line' for them – so sacred to them that they dare not allow their own conscience to question it. And there are so many families in which this confusion between spirituality and servitude is implanted from such an early age, and in which spiritual education is so meager, that nothing concerning religion may be discussed."

"But this [taboo] is clearly not imposed by the terrorism of some crazy fanatics... No, this problem is infinitely deeper. But who is willing to hear this? In the Muslim world, there is only silence regarding this matter; in the Western media, they listen only to all those terrorism experts who increase the general myopia day by day. Do not delude yourself, my friend, by pretending that by eliminating Islamist terrorism we will settle all of Islam's problems. Because what I have described here – a tyrannical, dogmatic, literalist, formalistic, macho, conservative, and regressive religion – is too often the mainstream Islam, the everyday Islam, which suffers and causes suffering to too many consciences, the irrelevant Islam of the past, the Islam that is distorted by all those who manipulate it politically, the Islam that always ends up strangling the various Arab Springs and the voice of the young people who are demanding something else. So when will you finally bring about this revolution in society and conscience that will make spirituality rhyme with liberty?

"Of course, there are pockets of spiritual freedom in your great territory: families that hand down [to their children] an Islam of tolerance, personal choice and spiritual depth. There are places where Islam still gives the best of itself: a culture of sharing, honor, pursuit of knowledge, and spirituality in search of the sacred place where man and the ultimate reality called Allah meet. In the land of Islam, and in Muslim communities worldwide, there are strong and free consciences. But they are condemned to exercise their freedom without the recognition of real rights, facing the peril of community control or sometimes even of the religious police. Never has the right to say 'I choose my Islam' or 'I have my own relationship with Islam' been recognized by the 'official Islam' of the dignitaries, who fight to impose [the view] that 'the doctrine of Islam is unique' and that 'obeying the pillars of Islam is the only right path...'

"This denial of the right to freedom of religion is one of the roots of the evil from which you suffer, oh my dear Muslim world; it is one of those dark wombs in which, in recent years, monsters have grown, and from whence they leap out at the frightened faces of the whole world. For this iron religion imposes excruciating violence upon all your societies; it too closely confines your daughters and your sons in the cage of good and evil, the lawful (halal) and the illicit (haram), chosen by none but imposed on all. It traps the wills, it conditions the mind, it prevents or hinders every personal life choice. In too many of your countries, you still tie together religion with violence – against women, against 'bad' believers, against Christians and other minorities, against thinkers and free spirits and against rebels – so that religion and violence ultimately blend within the most unbalanced and vulnerable of your own sons – in the monstrous form of jihad."

"You Must Begin By Reforming Education... Based On Universal Principles"

"So, I beg of you, don't pretend to be amazed that demons such as the so-called 'Islamic State' have taken your face. Monsters and demons steal only those faces that are already distorted by too much grimacing. And if you want to know how to refrain from bringing forth such monsters, I will tell you. It's simple yet difficult: You must begin by reforming the education you give your children, in its entirety, in all your schools and all your places of knowledge and power. You must reform them according to [the following] universal principles – even if you are not the only one violating or disregarding [these principles]: freedom of conscience, democracy, tolerance, civil rights for [those of] all worldviews and beliefs, gender equality, women's emancipation from all male guardianship, and a culture of reflection and criticism of the religion in universities, literature, and the media. You cannot go back, and you can do no less than this. For it is only by doing so that you will no longer give birth to such monsters. If you do not do so, you will soon be devastated by [these monsters'] destructive power.

"Dear Muslim world: I am but a philosopher, and as usual some will call the philosopher a heretic. Yet I seek only to let the light shine forth once again – indeed, the name that you have given me commands me to do so: Abdennour, Servant of the Light. If I did not believe in you, I would not have been so harsh in this essay. As we say in French, 'He who loves well, punishes well' – and those who today are not tough enough with you, who want to make you a victim, are doing you no favors. I believe in you. I believe in your contribution to build the future of our planet, to create a world that is both humane and spiritual!

"Salaam, peace be upon you."

European autos: ramping up

The high end is still the place to be

The self-driving F015 Mercedes-Benz is exciting, sexy and mostly irrelevant. The automobile business is not about whizz-bang; it is about basics — update the capital consuming monster that is the production line to make cars more cheaply and more cleanly, and sell more of the highest-margin models.

In recent years, the US market generated cash for the auto industry, emerging markets generated growth, and Europe generated overcapacity. That is all starting to change. The US is still doing its bit — record US sales in 2014, with growth in high margin pick-up trucks and sport utility vehicles — so the industry is producing cash. But emerging markets are not delivering the growth expected. Brazil and Russia are suffering and even Chinese growth is slowing.

Instead, it is Europe that is growing. European sales between January and November last year grew 6 per cent over the same period in 2013. In the UK, 2.5m new cars were registered in 2014, a 10-year high and 9 per cent increase over 2013. But Europe will not keep growing like this much longer. The improvement is coming from a low base, and sales have been boosted by financial incentives — such as Spain’s scrap incentives and a UK contract purchase scheme — that may not last.

So with sales growth uncertain, manufacturers need to do all they can to keep costs down. That is tough. Rising emission standards push up manufacturing costs and customers are expecting more for their money (sat nav as standard, please.) So carmakers are trying to cut costs by making as many models as possible from a common platform. Component makers such as Valeo and Continental — whose products allow manufacturers to improve emissions fairly cheaply and quickly — should find plenty of business.

In this environment, premium carmakers such as BMW and Daimler look well placed. The luxury market is doing well and they have scope to introduce smaller models (which will help them to meet CO2 targets). If novelties such as the F015 can help them a little way down that road, so much the better.