In the banking crisis we learned that a group of U.S. banking and insurance firms are allegedly "Too Big To Fail." Now the world's largest mining company BHP Billiton Ltd. (NYSE ADR: BHP) has grown so large it is struggling to make meaningful deals, introducing us to another phrase: "Too Big To Grow."
BHP's dilemma is not surprising. Its downside is that, as the largest mining company in the world, it has outgrown its roots. BHP's current management has shown it cannot pull off a major transaction while handling a company of this size.
Its heavy weight becomes an overwhelming force in any sector it applies its resources towards, which has caused the company to have its last three planned mergers stopped by regulation red tape. Nations are not interested in having their prime natural resource company swallowed up and then forgotten about by a mining behemoth.
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China's Continued Failure to Rebalance Growth Threatens Global Economic Stability
China announced yesterday (Wednesday) that its trade surplus grew 60.7% in October from the month before as efforts to rebalance its economic growth this year have failed. Furthermore, recent policy tightening measures mean domestic demand is unlikely to pick up in the near future.
"The rebalancing of China's economy has an awfully long way to go – in fact it's hardly even got started," Mark Williams, an economist at Capital Economics Ltd. who previously worked at the U.K. Treasury as an adviser to China, told Bloomberg. "In normal circumstances, the world might be willing to wait, but not when the likes of the U.S. are struggling with very high unemployment."
In a sign China's export-driven growth has not shifted to an increase in domestic consumption, China's trade surplus hit $27.15 billion last month, up from $16.9 billion in September. Exports rose 22.9% in October from the year before and imports climbed 25.3%. The trade surplus was slightly higher than expectations of $26.4 billion, according to a poll reported by Dow Jones Newswires.
"The rebalancing of China's economy has an awfully long way to go – in fact it's hardly even got started," Mark Williams, an economist at Capital Economics Ltd. who previously worked at the U.K. Treasury as an adviser to China, told Bloomberg. "In normal circumstances, the world might be willing to wait, but not when the likes of the U.S. are struggling with very high unemployment."
In a sign China's export-driven growth has not shifted to an increase in domestic consumption, China's trade surplus hit $27.15 billion last month, up from $16.9 billion in September. Exports rose 22.9% in October from the year before and imports climbed 25.3%. The trade surplus was slightly higher than expectations of $26.4 billion, according to a poll reported by Dow Jones Newswires.
Taipan Daily: The "Secret" Global Alliances That Can Make You Rich
I have a confession to make... I'm a big Harry Potter fan. Last night, I was re-watching Harry Potter and the Goblet of Fire. In this movie, Hogwart's School of Witchcraft and Wizardry hosts the Tri-Wizard's Cup, an Olympics, of sorts, for witches and wizards from international schools. Its purpose is to promote international magical […]
Singapore Moves to Restructure Asia's Stock Exchange Model With Australia Merger
Singapore Exchange Ltd. (SGX) announced yesterday (Monday) it agreed to buy Australia's main stock exchange, ASX Ltd., for $8.3 billion. The deal came about because both countries seek strength against growing Asian market competition, and Singapore strives to be a more sophisticated global financial center.
In a cash and stock deal, Singapore's stock market operator is offering A$48 (U.S. $47.11) for each ASX share, consisting of A$22 in cash and 3.743 SGX shares per ASX share. The offer is at a 37% premium to what ASX shares traded on Friday.
"The combination of ASX and SGX, offering innovative new products and services to the market, will allow customers to maximize future opportunities, where Asia Pacific takes center stage globally as the source for capital, wealth creation and trading opportunities," SGX Chief Executive Officer Magnus Bocker said in a joint statement.
In a cash and stock deal, Singapore's stock market operator is offering A$48 (U.S. $47.11) for each ASX share, consisting of A$22 in cash and 3.743 SGX shares per ASX share. The offer is at a 37% premium to what ASX shares traded on Friday.
"The combination of ASX and SGX, offering innovative new products and services to the market, will allow customers to maximize future opportunities, where Asia Pacific takes center stage globally as the source for capital, wealth creation and trading opportunities," SGX Chief Executive Officer Magnus Bocker said in a joint statement.
Wall Street Bonuses Will Cost Us All in the Long Run
Wall Street firms may not be reaping the record-breaking revenues of 2004-2007, but they're paying themselves the lofty bonuses of that lavish era - and they're doing it at our expense and with the government's blessing.
Wall Street's pay packages, including bonuses, are set to total 4% more in 2010 than in the already record year of 2009, The Wall Street Journal recently reported.
I yield to nobody in respect for the investment banking business - having served as an investment banker for 27 years - but these salaries and bonuses derive from U.S. Federal Reserve subsidies, and are mostly being taken out of the hide of the rest of us.
Wall Street's record bonuses come out of bank earnings that have been pretty robust, though not necessarily record-breaking. This is mainly the result of two Fed subsidies:
Wall Street's pay packages, including bonuses, are set to total 4% more in 2010 than in the already record year of 2009, The Wall Street Journal recently reported.
I yield to nobody in respect for the investment banking business - having served as an investment banker for 27 years - but these salaries and bonuses derive from U.S. Federal Reserve subsidies, and are mostly being taken out of the hide of the rest of us.
Wall Street's record bonuses come out of bank earnings that have been pretty robust, though not necessarily record-breaking. This is mainly the result of two Fed subsidies:
To find out how you're paying for Wall Street excess and how the economy stands to lose read on...
How to Profit From Europe's Stealthy Resurgence
European countries - both inside and outside the Eurozone - are slashing their budget deficits. Sure, some - like Greece and Spain, have to. But others are too. And here's the surprising reality: Europe may gain from its fiscal pain - and its deficit-trimming actions offer the best hope for a lengthy recovery. Find out how, in this free report.
What We Can Learn From The Stock Market Genius That Wall Street Loves to Ignore
Mathematician Benoit B. Mandelbrot, the inventor of fractal geometry, died Oct. 14.
As mathematicians go, Mandelbrot was very likely the best of the last half-century. And that brilliance extended to the financial markets. In fact, his groundbreaking insights into the operations of the stock market could have been used to avert the 2008 crash - had those insights only been heeded.
But Mandelbrot - for all his stock market genius - has been largely ignored by Wall Street.
As investors, let's not make the same mistake.
To understand how to profit from Mandelbrot's insights, please read on...
As mathematicians go, Mandelbrot was very likely the best of the last half-century. And that brilliance extended to the financial markets. In fact, his groundbreaking insights into the operations of the stock market could have been used to avert the 2008 crash - had those insights only been heeded.
But Mandelbrot - for all his stock market genius - has been largely ignored by Wall Street.
As investors, let's not make the same mistake.
To understand how to profit from Mandelbrot's insights, please read on...
To understand how to profit from Mandelbrot's insights, please read on...
Question of the Week: Investors Seek Metals To Soften Blow of Global Currency War
The housing market remains in the dumper. U.S. stocks - despite a rally - are still 22% below their record highs of two years ago. And the "official" unemployment rate remains at a heart-stopping 9.6%.
With their knees almost ready to buckle under such burdens already, how will American consumers respond when clothes, computer accessories and other key consumer staples at their neighborhood Wal-Mart Stores Inc. (NYSE: WMT) undergo an overnight price hike of 30% to 60%?
As the United States aims to increase exports by debasing the dollar, a global currency war is underway that could swallow consumers and investors if they don't prepare for the likelihood of a weaker dollar.
The United States, China, Switzerland, Brazil, South Korea, Australia, Japan have all entered the war, trying to bring down their currencies to boost exports and fuel growth. Countries are vying to win the "race to the bottom," as it's been called by Money Morning Contributing Writer Peter Schiff.
With their knees almost ready to buckle under such burdens already, how will American consumers respond when clothes, computer accessories and other key consumer staples at their neighborhood Wal-Mart Stores Inc. (NYSE: WMT) undergo an overnight price hike of 30% to 60%?
As the United States aims to increase exports by debasing the dollar, a global currency war is underway that could swallow consumers and investors if they don't prepare for the likelihood of a weaker dollar.
The United States, China, Switzerland, Brazil, South Korea, Australia, Japan have all entered the war, trying to bring down their currencies to boost exports and fuel growth. Countries are vying to win the "race to the bottom," as it's been called by Money Morning Contributing Writer Peter Schiff.
M&A Frenzy Stays Hot With Pfizer's $3.6 Billion Deal for King Pharmaceuticals
The frenzy of activity in mergers and acquisitions (M&A) continued yesterday (Tuesday), when Pfizer Inc. (NYSE: PFE) agreed to pay $3.6 billion in cash to buy King Pharmaceuticals Inc. (NYSE: KG).
Pfizer, the world's largest drugmaker, is paying $14.25 per share for King. That's a premium of 40% to the stock's Monday closing price of $10.15. As part of the deal, Pfizer will receive such products as Avinza and EpiPen, a pre-filled injection designed to quickly treat serious allergic reactions.
King also gives Pfizer access to the Flector pain patch and morphine pill Embeda. Pfizer has been looking to expand its pain products beyond the arthritis treatment Celebrex and nerve pain remedy Lyrica. King had $1.78 billion in revenue last year and is focused on making pain medications that patients can't abuse.
Pfizer needs new products to help offset revenue losses expected next year when generic copies of its top-selling drug, the Lipitor cholesterol pill, enter the market. Lipitor sales topped $11.4 billion last year.
Pfizer, the world's largest drugmaker, is paying $14.25 per share for King. That's a premium of 40% to the stock's Monday closing price of $10.15. As part of the deal, Pfizer will receive such products as Avinza and EpiPen, a pre-filled injection designed to quickly treat serious allergic reactions.
King also gives Pfizer access to the Flector pain patch and morphine pill Embeda. Pfizer has been looking to expand its pain products beyond the arthritis treatment Celebrex and nerve pain remedy Lyrica. King had $1.78 billion in revenue last year and is focused on making pain medications that patients can't abuse.
Pfizer needs new products to help offset revenue losses expected next year when generic copies of its top-selling drug, the Lipitor cholesterol pill, enter the market. Lipitor sales topped $11.4 billion last year.
International M&A Boom Fueled by Global Currency War
A binge of mergers and acquisitions (M&A) is being fueled by the global currency war, which has increased the value of emerging market currencies.
The value of worldwide M&A totaled $1.75 trillion during the first nine months of 2010, a 21% increase from comparable 2009 levels and the strongest nine month period for M&A since 2008, according to Thomson Reuters.
But mergers and acquisitions involving companies located in the emerging markets skyrocketed by 62.9% during the same period over 2009, totaling $480.7 billion. During the first three quarters of 2010, emerging markets accounted for 27.4% of worldwide M&A volume compared to 21% during the comparable period in 2009.
And companies are showing more willingness to venture across borders to find the resources they're after.
M&A activity in deals across international borders has surged during the first nine months of 2010, totaling $723 billion accounting for 41.2% of overall M&A volume, compared to 26.1% last year at this time.
IMF Warns of Slower Growth As Currency War Rages On
Meetings of the Group of Seven (G-7) countries in Washington this week could feature a clash of views that have sparked an international currency war even as the International Monetary Fund (IMF) warned that growth in developed economies is slowing.
The conflict represents a fundamental disagreement about how to sustain the global economic recovery among countries that prefer flexible exchange rates like the United States, and others that are resisting calls to allow its currency to appreciate, like China.
A renewed push for easier monetary policy came as the IMF warned growth in advanced economies is falling short of its forecasts.
The conflict represents a fundamental disagreement about how to sustain the global economic recovery among countries that prefer flexible exchange rates like the United States, and others that are resisting calls to allow its currency to appreciate, like China.
A renewed push for easier monetary policy came as the IMF warned growth in advanced economies is falling short of its forecasts.
You Heard It Here First: A Global Currency War is Being Fought - And There Will Be No Victors
Brazil's finance minister, Guido Mantega, recently acknowledged to the global investment community what most trade officials already believed: An "international currency war" has broken out.
And, in this war, there won't be a real victor.
"We're in the midst of an international currency war, a general weakening of currency," Mantega told The Financial Times. "This threatens us because it takes away our competitiveness."
Mantega's comments came just weeks after Japan joined Switzerland in intervening in the foreign-exchange market. But the reality is that the currency war has been under way since 2008.
At least, that's when Money Morning Chief Investment Strategist Keith Fitz-Gerald first warned that countries - most notably the United States - would debase their currencies in a race to boost their exports and keep economic growth afloat.
"The government has adopted a weak-dollar policy," Fitz-Gerald said in an interview in March 2008. "They're sending out a message loud and clear: 'We want you to sell the dollar.'"
By holding the central bank's benchmark lending rate down in a record low range of 0.00% to 0.25% for close to two years now and buying up Treasuries in a policy known as "quantitative easing," the U.S. Federal Reserve is effectively debasing the dollar.
But the U.S. central bank isn't alone.
And, in this war, there won't be a real victor.
"We're in the midst of an international currency war, a general weakening of currency," Mantega told The Financial Times. "This threatens us because it takes away our competitiveness."
Mantega's comments came just weeks after Japan joined Switzerland in intervening in the foreign-exchange market. But the reality is that the currency war has been under way since 2008.
At least, that's when Money Morning Chief Investment Strategist Keith Fitz-Gerald first warned that countries - most notably the United States - would debase their currencies in a race to boost their exports and keep economic growth afloat.
"The government has adopted a weak-dollar policy," Fitz-Gerald said in an interview in March 2008. "They're sending out a message loud and clear: 'We want you to sell the dollar.'"
By holding the central bank's benchmark lending rate down in a record low range of 0.00% to 0.25% for close to two years now and buying up Treasuries in a policy known as "quantitative easing," the U.S. Federal Reserve is effectively debasing the dollar.
But the U.S. central bank isn't alone.
De-Coupling Back in Vogue as Emerging Economies Outshine the U.S.
While the U.S. economy is struggling to break its slump, growth remains strong in other places around the world - so strong, in fact, that analysts are breaking out a term that's spend much of the past two years on the shelf: De-coupling.
U.S. gross domestic product (GDP) will meandered along with a meager 1.7% expansion in the second quarter and is expected to grow by less than 2% for the full year.
Meanwhile, Brazil's GDP is on pace to expand by 7.5%, India's economy is projected to grow by 8.5% and China's economy is expected to grow by 9.5% this year.
Emerging market economies are moving ahead at such a brisk rate that their combined GDP will be bigger than developed countries by 2015, according to the World Bank.
Now, the biggest Wall Street firms - including Goldman Sachs Group Inc. (NYSE: GS) Credit Suisse Group AG (NYSE ADR: CS) and Bank of America (NYSE: BAC) - are betting that the global economy has de-coupled from the United States, and will shake off any slowdown in the world's largest economy.
U.S. gross domestic product (GDP) will meandered along with a meager 1.7% expansion in the second quarter and is expected to grow by less than 2% for the full year.
Meanwhile, Brazil's GDP is on pace to expand by 7.5%, India's economy is projected to grow by 8.5% and China's economy is expected to grow by 9.5% this year.
Emerging market economies are moving ahead at such a brisk rate that their combined GDP will be bigger than developed countries by 2015, according to the World Bank.
Now, the biggest Wall Street firms - including Goldman Sachs Group Inc. (NYSE: GS) Credit Suisse Group AG (NYSE ADR: CS) and Bank of America (NYSE: BAC) - are betting that the global economy has de-coupled from the United States, and will shake off any slowdown in the world's largest economy.
Smaller U.S. Regional Banks Fast Becoming Takeover Targets
Sharks are circling the beleaguered financial services industry and the upshot may well be a wave of mergers and acquisitions (M&A) that analysts say could lead to higher valuations, especially for smaller, regional banks.
Activity in the financial services industry has been subdued for the past three years as weak loan growth, shrinking profit margins, increased regulation and low valuations kept investors at bay. But now forces pressuring the industry to contract "will create more willingness to sell from bank management teams and board of directors over the next year," and drive consolidation, according to the report by Credit Suisse Equity Research.
Specifically, weak U.S. regional banks could be attractive targets for Canadian banks looking to expand their U.S. holdings, the report said.
Activity in the financial services industry has been subdued for the past three years as weak loan growth, shrinking profit margins, increased regulation and low valuations kept investors at bay. But now forces pressuring the industry to contract "will create more willingness to sell from bank management teams and board of directors over the next year," and drive consolidation, according to the report by Credit Suisse Equity Research.
Specifically, weak U.S. regional banks could be attractive targets for Canadian banks looking to expand their U.S. holdings, the report said.
Money Morning Mailbag: Don't Bank on a Return to the Gold Standard
Gold prices closed above $1,300 an ounce for the third straight day yesterday (Thursday), continuing a record run that's delighted gold bugs everywhere.
The surge shows just how much confidence investors have lost in fiat money, and greater appreciation for what former U.S. Federal Reserve Chairman Alan Greenspan last month called the "ultimate means of payment."
Gold's price surge "is a signal that there is a problem with respect to currency markets globally," Greenspan told the Council on Foreign Relations.
Indeed, Money Morning has repeatedly warned readers about the pitfalls of paper currency. However, it's unlikely that readers hoping for a return to the gold standard will get their wish.
The surge shows just how much confidence investors have lost in fiat money, and greater appreciation for what former U.S. Federal Reserve Chairman Alan Greenspan last month called the "ultimate means of payment."
Gold's price surge "is a signal that there is a problem with respect to currency markets globally," Greenspan told the Council on Foreign Relations.
Indeed, Money Morning has repeatedly warned readers about the pitfalls of paper currency. However, it's unlikely that readers hoping for a return to the gold standard will get their wish.