Like the words of that old Steven Allen classic: "This could be tbe start of something big."
We certainly hope so.
Pfizer sort of kicked the would-be tax-saving party off. And don't look now but there's another one. This one taken up by shareholders of the biggest drug chain in the US, Walgreens.
You want to unchain Prometheus? Forget all that neoclassical Keynesian government spending gibberish. Unleash what you've got. Cut the onerous corporate tax shackles and watch the economy and jobs take off.
Kudos to those investors pushing Walgeens to relocate in Switzerland after the firm's $16B takeover of Alliance Boots recently. Are you paying attention corporate America and all you shareholders concerned about having enough money for your retirement?
Insist on an end to double taxation of dividends. Put your foot down on that big, fat Washington Leviathan. Their tax nonsense and wasteful ways are just an old song nobody's going to sing any more. It won't happen without you.
If you want proof of how effective it would be just check what stock prices of other drugstores did on the news.
Mohammed El-Erian, the ex-Pimco guru, who spends much of his time now writing articles for Bloomberg and the Financial Times, a nice gig if one can get it, in today's FT penned a piece about what seems these days everyone's favorite topic, deflation versus inflation.
To begin with, most didn't expect the flattening yield curve that's been riding herd on the market since the start of the year. Nor did they expect the small cap slowdown, to name just one of many other surprises.
El-Erian lists three things, lack of European and American economic growth; US Fed choosing to ignore jobs and other data, saying they will keep interest rates low for time being and that few traders were ready for these low rates let along a flat yield curve.
With the above in mind here's a quote, noting that the most important sentences here are the first and the last rather tortuous one.
I
n theory, there is little to worry about as lower interest rates should be self-correcting on all three counts. By reducing mortgage rates, they increase house affordability and, for existing homeowners, the incentive to refinance mortgages--both of which support homes prices and housing activity. They also push investors out of bond holdings and into riskier assets.
Indeed, this is the main objective of the 'unconventional policies' pursued by leading central banks, in the hope that the resulting price surge in risky assets makes households and businesses feel better, encouraging greater consumption and higher investments (via energized "animal spirits").
The little to worry about should start you worrying big time. Anytime you hear in theory, it's like when the girl says, "You're a really nice guy, but...." Look out for that but. It's a damage control term as in "Well, we did try to warn you.".
Don't lose any sleep, just be aware that bureaucrats are running this show. Any day now one may be appearing at a theater or VA Medical Center near you saying, "I'm a bureaucrat and I'm here to help you."
In our recent post, "Cooking With Stealth," we wrote the following.
The whole thing smells of an economic scam to keep the eyes of working folks off inflation and declining purchasing power. In some circles it's referred to as highway robbery by stealth.
Now go back and reread Mr. El-Erian's first and last sentences. As we said, it's nice work if one can get it. And you listen carefully you can hear the air being pumped.
Well, they went and did it again.
One could ask what part of rejection doesn't Pfizer's headman, Ian Read, understand.
We've heard he's Scottish by birth. Maybe that explains it.
If you're a PFE shareholder--and we and our clients are--and this last rejection, like a good vaccine, takes, you ought to be thrilled. Vaccines are something PFE and its leader should grasp; it's part of their medical portfolio.
Truth be spread and it seldom is in these big acquisitions (Just ask KKR!) this one smelled from the beginning. Escaping the USA's onerous corporate tax burden, something all big US corporations ought to consider if for no other reason than to get the attention of those Washington buffoons, was the best part of this stinker.
If you were a money manager and your track record was as pathetic as Pfizer's M&A deals when it comes to creating value, you'd been tarred, feathered and left for broke a longtime ago.
And on a synergy basis the two sides had about as much in common as me and my ex-girl friend.
Pfizer should take a hint from Swiss voters who just rejected the highest minimum wage hike in the history of the planet by nearly 74 percent.
When you're not welcome, your not welcome.
Buy backs have been much the rage in this latest bull market charge.
Now there appears to be a new-old kid in town, capital spending. If you're looking for a reliable indicator, you might want to use the old hiker's wind gauge of wetting the tip of your index finger and sticking it in the air, chances are you'll fare just about as well as those with their expensive, convoluted econometric confabulations.
And right now that moist finger seems to be drying in the direction of capital spending. This is not to suggest that capital spending had dried up. Like my old boss, it just wasn't appreciated that much. Buy backs were.
In this weekend's edition of the Financial Times the teaching of the dismal science at the undergraduate level came under some heavy fire: "The world has changed a lot. Economics has changed a lot too. But the curriculum hasn't."
At the center of this controversy is the claim that for the past 30 years teaching quantitative methods have increasingly dominated the courses. This is per se, according to the critics, not a cry against neoclassical or mathematical tenets of the dismal science but a call for the recognition that these are only part of the total.
With all undue respect, we highly recommend the wet index finger wind test. It's right up there with another bete noire of classical economics, anecdotal evidence. And if you're really interested in discovering what's happening, put the two together.
On a performance basis, there's something else in the air. Stocks of companies that have increased capital spending of late have far outperformed those who are using their cash, borrowed or otherwise, for buybacks. The bottom line here is sentiment and perception are cuts from the same investor fabric.
Low interest rates create low funding costs. So you might want to start looking at firms that are putting their money where their future growth is since growth drives earnings. There is, however, just one caveat. But please don't try to tell it to elected bureaucrats.
Some folks are just better than others at managing they're own money.
Well, we've got a new international bureaucratic hero.
He's not an Italian. He's a Frenchman. His name is Arnoud Mounteburg, France's so-called fiery economy minister.
As we stated in a previous post France is considering legislation to block the takeover of French firms by foreigners. In defense of his position on the issue, Mr. Mounteburg recently labeled the decree a "choice of economic patriotism."
If foreign investment in France gets any rarer it'll soon be on the international endangered species list. France already protects from foreign invaders some 11 various industries. The latest move would add health, energy, transport and telecom.
French stocks have been one of the poorest performers over the last four years. That's the good news. The bad news is if adopted the new rule could subject one tenth of the CAC 40 to the law.
Mountebourg is not new to this game. He reportedly is the one who killed Yahoo's bid for Dailymotions, a French you tube competitor. To be fair other countries, including the US, have from time to time fought against foreign takeovers. Quite often it was disguised in the interest of national security.
Mounteburg is particularly bellicose in the eyes of many. He is especially upset about General Electric's bid for the French electrical firm Alstom. Known as "decret Alstrom" or for those with smaller egos "decret Mountebourg," the good economy minister labeled it the end of "Laissez faire economic policy."
Perhaps the rest of the globe, especially those with foreign capital to invest, should issue its own decree. Call it "decret le France go down the economic tubes, a decret of global patriotism."
Here's what everyone's been talking about, the yield on 10-year Treasuries. But for something more interesting read the link below about Helicopter Ben Bernanke. He's sill tossing the money around, only this time he's getting handsomely paid.
http://www.businessinsider.com/ben-bernankes-bond-trade-2014-5?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29
Here's what we'll call a recent central bank round up.
You might have already read our post on what Pimco's Bill Gross had to say about interest rates, bonds and his new neutral, a 2 percent yield on 10-year Treasuries.
--The Fed noted US rates will most likely stay low irrespective of jobs and inflation data.
--The Bank of England ruled out an interest rate hike for now, again despite improving jobs and manufacturing reports.
--The Mario Daghi-led ECB has been titillating investors for a while now without any simple follow up or action.
It reminds of the old joke about the city of Houston's horrid summer humidity. A couple park their top-down convertible in Lover's Lane late one night and start getting intimate. When the guy reaches for the button to put the top up for more privacy, he accidentally switches on the air conditioner full blast.
The shock of cool air blows the lady's dress up around her neck to which she replies: "That's great! But doesn't anyone do anything by hand any more."
--In Japan it's Abernomics City where consumers have been on a spending spree to escape an onerous consumption tax. If bond yields there--already below those on US bonds--get any lower they will turn into a politician and run for public office.
So here's a simple question. Will these falling yields at some future date turn into the proverbial falling knife? And if so who gets burned and how much?
Use to be an old saying: Cooking with gas. Not only is gas abundant today, it's a clean burner. So when in doubt or you need to obfuscate, try a little stealth.
If you like the prospect of modest economic growth over the next few years, you'll like Pimco Chief Bill Gross' characterization new-neutral.
Back in 2009 Gross concocted the term new normal, a period of low inflation or even deflation. Technology was killing jobs faster than a politician's speech on a warm summer evening puts people to sleep. The great immigration was on loosing more labor into the open market and the financial crisis canceled the retirement plans of a pack of baby boomers.
Too many workers, too few jobs. Consumers were tapped out but didn't know it yet. Like most in life they need to be told. And they finally were.
New neutral suggests the global economy is transitioning from the financial crisis recovery period to what could be called for want of a better term, just plain boring. In short, it foretells a low Fed lending rate. Low here means below what many consider normal. According to Gross, the Middle America transplant, it's around 2%.
Now that's an interesting proposition. What is considered normal in anything? We appreciate Gross and his fellow word smithers and their cuteness. But it's really dangerous to depend on a band of so-called bankers to determine or define anything let alone below normal. (See Mario Draghi and the ECB.)
One could ask how many of these people are in fact normal? And by whose definition?
The whole thing smells of an economic scam to keep the eyes of working folks off inflation and declining purchasing power. In some circles it's referred to as highway robbery by stealth.
After all, restive masses are not a good thing for markets, bankers, money runners or politicians.
