DUT.F - Moody's Corporation

Frankfurt - Frankfurt Delayed Price. Currency in EUR
197.00
-2.28 (-1.14%)
At close: 8:08AM CET
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Previous Close199.28
Open197.00
Bid199.06 x 50000
Ask199.56 x 50000
Day's Range197.00 - 197.00
52 Week Range118.50 - 200.05
Volume8
Avg. Volume25
Market Cap37.287B
Beta (3Y Monthly)1.24
PE Ratio (TTM)28.87
EPS (TTM)6.82
Earnings DateN/A
Forward Dividend & Yield1.79 (0.90%)
Ex-Dividend Date2019-11-20
1y Target EstN/A
  • Ecuador Bonds Hit Record Low Amid Latin America’s Month of Chaos
    Bloomberg

    Ecuador Bonds Hit Record Low Amid Latin America’s Month of Chaos

    (Bloomberg) -- Ecuador’s dollar bonds slumped to a record low Monday after Congress rejected a bill designed to narrow the budget deficit and pave the way for the disbursement of more loans from the International Monetary Fund.The country’s dollar bonds maturing in 2028 declined for a ninth day -- sinking more than 9 cents on the dollar to 77 cents in New York trading. The extra yield investors demand to hold Ecuador debt over U.S. Treasuries widened 253 basis points to 11.06 percentage points, according to J.P. Morgan indexes.Across South American bonds have been pummelled this month as social unrest swept Bolivia and Chile, violent crime flared in Mexico and elections heralded the return of populism to Argentina. But it is Ecuador that is now leading the pack down as political pressures threaten to send the fiscal deficit rising out of control, with at least six of the country’s dollar sovereign bonds falling 10 cents or more on Monday.The reforms proposed by President Lenin Moreno, which included an increase in corporate taxes, were rejected by 70 of 133 lawmakers on Sunday with just 32 votes in favor and 31 abstentions. The president, in a nationwide television and radio address, vowed to submit a new fast-track bill on Nov. 19. The stakes are high for the embattled Latin American nation.“The inconvenient reality is that if Ecuador loses IMF support, then they lose market access,” Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont Securities, wrote in a note.Ecuador is seeking $6.7 billion in new debt in next year’s draft budget, partly to repay $4.31 billion of debt coming due. Its loan program with the IMF is worth $4.2 billion.Gasoline RiotsThe rejection leaves a funding gap for next year of $1.6 billion, Jaime Reusche, a VP-Senior Credit Officer at Moody’s Investors Service, said in an emailed statement.“The vote against the measures suggests that the government’s political capital may be more limited than initially thought,” Reusche said. “The baseline scenario that was consistent with Ecuador’s B3 rating included the passing of these measures.”Moreno, who took office in 2017 and pivoted to the center-right after campaigning from the left, is struggling to narrow the fiscal deficit after violent protests in early October forced him to backtrack on a plan to scrap fuel subsidies.Legislators allied with Moreno’s predecessor and estranged political mentor, Rafael Correa, and indigenous party Pachakutik voted against the reform package Sunday as a rejection of the IMF accord. Others had challenged the breadth of the measures, which included issues from student debt to mining policy and central bank autonomy, and the short time-frame to discuss its more than 400 articles.The bill aimed to raise more than $700 million, largely through a gradual increase in the corporate income tax for most companies over the next three years. The new bill will focus on taxes, leaving out other elements like central bank reform, Moreno said.The government is working closely with the IMF over the proposals, said a person with knowledge of the negotiation who wasn’t allowed to speak on the record.Moreno’s recent actions have shown that he is willing to stake his presidency on fulfillment of the IMF agreement. Still, that may not be enough.“I’m skeptical of the ability to get a bill passed on tax increases alone and without any of the other elements that would have made it palatable” for some legislators, said Jose Hidalgo, head of think tank CORDES in Quito. “The essential question now becomes whether Ecuador can obtain the remaining disbursement of $500 million planned for the end of the year.”(Updates fall of Ecuador 2028 bonds to record low, adds regional context in third graf.)To contact the reporters on this story: Stephan Kueffner in Quito at skueffner1@bloomberg.net;Andres Guerra Luz in New York at aluz8@bloomberg.netTo contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Philip SandersFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • This fund manager consistently beats the stock market by exploiting your foibles
    MarketWatch

    This fund manager consistently beats the stock market by exploiting your foibles

    Many investors go to business school to improve their investing prowess. Exploiting the perennial character flaws of other investors is a key path to market-beating returns. Managed by Brian Yacktman, the fund beats its Morningstar “large cap blend” category by 11.2 percentage points in the past year and 4.4 percentage points annualized over the past three years, according to Morningstar.

  • Germany Dodges Recession With Surprise Third-Quarter Growth
    Bloomberg

    Germany Dodges Recession With Surprise Third-Quarter Growth

    (Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.Germany narrowly dodged what would have been its first recession in six years, putting a damper on speculation that the government will add fiscal stimulus any time soon.The surprise expansion doesn’t change the fact that the economy is going through a torrid period that’s turned it from the euro area’s traditional growth engine into a source of weakness. Expansion was just 0.1% in the third quarter, with the 19-country currency bloc only a little better, at 0.2%.A pile up of trade tensions, weaker world demand and turmoil in the automobile sector has led to Germany’s worst manufacturing slump in a decade and put question marks over its role as an economic powerhouse.Weakness in the global economy was also evident elsewhere on Thursday. Expansion in Japan cooled sharply in the third quarter, and China saw slower growth in factory output and consumption coming off the boil.Germany’s GDP increase was led by consumer and government spending. Construction and exports also rose, while investment in machinery and equipment fell. The contraction in the second quarter -- which had sparked months of recession speculation -- was revised to 0.2% from 0.1%.What Bloomberg’s Economists Say“The question remains how much of the weakness in manufacturing will spread to services. Our base case is that some of the damage will be transmitted, keeping growth slow, but that a downturn will be avoided.”\--Jamie Rush. Read the GERMANY REACTThere have been some signs recently that the economy may be through the worst of its downturn, and business sentiment appears to have stabilized. Third-quarter growth in most major euro economies beat expectations.But it’s far from an all-clear, with most key indicators still at multi-year lows and the economy expected to post sub 1% growth in 2019 and 2020. The pain has been felt across the major names in German corporate royalty, with firms from Siemens to BASF repeatedly warning that trade fights are hitting sentiment and investment.Upheaval in the car industry from emissions and the switch to electric engines have compounded the slump, and there’s little end in sight. Parts maker Continental AG said two days ago it sees no material improvement in global car production in the next five years, and Daimler AG announced plans to slash headcount at its Mercedes-Benz cars division.“The German economic model is more challenged than it has been in the past,” Dietmar Hornung at Moody’s said on Bloomberg TV. “We’re seeing headwinds, but it’s also a structural issue that could lead to a gradual weakening over time of Germany’s economic strength.”Concern about the economy has pushed German bond yields below zero and meant Germany faced a growing chorus of calls to unleash fiscal stimulus. The government has said that’s not needed and it’s likely to feel vindicated by Thursday’s figures.However, Economy Minister Peter Altmaier, speaking on ARD television shortly after the data were published, characterized growth as “still too weak.”“That means the upward trend has started but it’s proceeding very slowly,” he said.Much hinges on developments in the U.S.-China trade battles that have dominated the global economic landscape. The danger of U.S. levies on European automobiles isn’t fully off the table, suggesting manufacturing momentum will remain subdued.Consumers have also become wary. Households’ assessment of the growth outlook is at a seven-year low, financial expectations are deteriorating rapidly and fears of unemployment are rising.\--With assistance from Piotr Skolimowski, Zoe Schneeweiss, Iain Rogers, Kristian Siedenburg and Harumi Ichikura.To contact the reporter on this story: Yuko Takeo in Frankfurt at ytakeo2@bloomberg.netTo contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow, Fergal O'BrienFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Army Deploys to Lebanon Streets as Plea to Protesters Backfires
    Bloomberg

    Army Deploys to Lebanon Streets as Plea to Protesters Backfires

    (Bloomberg) -- The Lebanese army deployed heavily across the country and banks and schools remained shut for a second day as protesters incensed by a call to go home began to converge on the presidential palace.Life in much of Lebanon ground to a halt a day after President Michel Aoun told anti-government demonstrators to disperse or else they’d risk the country’s stability. The appeal provoked a new surge of nationwide unrest in which one man was killed, with major roads closed on Wednesday.Baabda Palace, the presidential residence in a mountain town on the outskirts of Beirut, is the latest focal point of the protests convulsing Lebanon since last month. While the president plays a largely ceremonial role, Aoun is becoming a target of rage since he’s calling the shots as the country endures its third week without a prime minister.“The system is broken and the credibility is gone,” Mohieddine Kronfol, Franklin Templeton’s Dubai-based chief investment officer for Middle Eastern and North African fixed income, said in a Bloomberg Television interview with Tracy Alloway and Yousef Gamal El-Din.Lebanon, one of the world’s most indebted nations, has been without a government since Saad Hariri resigned as premier in the face of the uprising, which is demanding the removal of politicians accused of pillaging public coffers.It’s one of the most serious crises for the country since the end of the 1975-1990 civil war. The government’s Eurobonds are the world’s worst performers in emerging markets this quarter despite a package of emergency measures rolled out in October. Its five-year credit-default swaps, a measure of the cost of insuring sovereign debt against default, are hovering near a record high.After appearing to lose momentum, demonstrations took an angrier turn after Aoun’s remarks as people burned tires and closed major roads. Outraged protesters stepped up demands for Aoun to resign too. Some called him “the squatter in the palace,” while others chanted “they are all a bunch of thieves.”Speaking in a televised interview from the presidential palace, Aoun said a new government would have to resemble the lineup brought down by popular protest late last month and those who couldn’t live with the political realities should leave.‘Such Negativity’“I ask the Lebanese not to behave with such negativity, especially as this can lead to counter-negative behavior and, consequently, a confrontation,” Aoun said. “If they continue this way, even if we don’t give them a slap, the country will die.”As the interview ended, thousands of people descended onto the streets across Lebanon, setting fires, pitching tents and renewing their demands for change. One protester loyal to Druze leader Walid Jumblatt was shot as soldiers tried to reopen a thoroughfare south of Beirut. He later died.The army said one of its personnel shot the man during a confrontation with protesters and the shooter has been detained. In a video posted online, Jumblatt told his supporters to remain calm and maintain trust in state institutions.Aoun said formal consultations to name a new prime minister would begin Thursday or Friday but could be delayed while politicians hammer out the shape of the next cabinet.Demonstrators are calling for a government of experts that’s able to steer Lebanon through a financial crisis that has put pressure on its decades-old peg currency peg. Aoun rejected that demand, saying experts should be represented alongside the political parties that dominate the elected parliament. That includes the Free Patriotic Movement led by his son-in-law, Foreign Minister Gebran Bassil, who’s been a particular target of public insults.Lebanon is facing its day of reckoning after years of mismanagement and excess spending. Traders and businesses are complaining about a low supply of dollars needed to pay for imports and warning of an imminent shortage of goods.Financial CrunchLocal lenders have tightened restrictions on the movement of capital by banning transfers abroad and setting limits on withdrawals to avoid a run on the banks. Central bank Governor Riad Salameh said he’d asked bankers to ease those restrictions.The government has few options. Already cut off from international markets, it delayed a Eurobond deal of up to $3 billion with the central bank and local lenders. Last week, Moody’s Investors Service downgraded Lebanon deeper into junk for a second time this year.Aoun confirmed reports that while efforts were under way to push Hariri back to the premiership, he was, so far, hesitant to return. The president asked protesters to go home and allow him and the future government to carry out the reforms required, a demand that appears to have.“We want a government that is appropriate and can fight corruption and have the courage to do so and devise an economic plan as well as prepare the country to move towards a civil society,” Aoun said.\--With assistance from Netty Ismail.To contact the reporters on this story: Dana Khraiche in Beirut at dkhraiche@bloomberg.net;Lin Noueihed in Beirut at lnoueihed@bloomberg.netTo contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Paul Abelsky, Michael GunnFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Markets Take the Under on Trump’s Economic Speech
    Bloomberg

    Markets Take the Under on Trump’s Economic Speech

    (Bloomberg Opinion) -- The global stock market drifted lower on Monday, posting its biggest decline in more than three weeks. Yes, there’s still plenty of time for equities to recover and gain for a sixth consecutive week, which would match their longest winning streak since they advanced for 10 consecutive weeks over the course of late 2017 and early 2018. But doing so may hinge on a critical event Tuesday. Even with the modest decline, the MSCI All-Country World Index is still up 19% this year. The surge in recent weeks is due largely to optimism that the U.S. and China are close to reaching an agreement on “phase one” of a broad trade deal. It doesn’t matter that the details are likely to be modest; what matters is that it would signal that the trade war isn’t worsening. That’s why President Donald Trump’s address to the Economic Club of New York on Tuesday is so critical. No one is quite sure which Trump will show up. Will it be the one who in recent weeks has trumpeted progress in trade talks, or will it be the one who has said that the U.S. hasn’t agreed to a rollback of tariffs on China, which is what the markets truly want? This is no small matter for investors. Various surveys have shown that trade uncertainty is the primary risk facing markets. In that sense, whatever Trump says on Tuesday has the potential to either ratify the rally or bolster the case that it’s built on little more than hope. And as everyone in markets learns on their first day in the business, hope isn’t a strategy. “Markets have been skittish waiting for any concrete information about the trade talks,” Matt Forester, the chief investment officer at BNY Mellon’s Lockwood Advisors, told Bloomberg News. At 15 times forecast earnings for the following year, the MSCI is trading at its most expensive level since the start of 2018.Trump’s talk is not the only big event for markets this week. Federal Reserve Chairman Jerome Powell will address the Joint Economic Committee of Congress on Wednesday, the same day as the start of public impeachment hearings against Trump. The U.S. Labor Department will also provide an update on inflation for October. The week ends with data on U.S. retail sales for October, which economists hope will be a reversal from September’s big miss to the downside. But as already stated, hope has no place in markets.THE BOND GAME ISN’T OVER YETThe bad news for the bond market is that November isn’t even halfway over and it’s already the worst month for fixed-income investors since April 2018, with the Bloomberg Barclays Global Aggregate Index down 1.40% as of Friday. The good news is that there’s plenty of time for the bond market to rebound. And just as with the stock market, Trump’s appearance at Economic Club of New York —  along with Powell’s testimony — may determine whether the recent sell-off in fixed-income assets is overdone. That’s the short-run prognosis. In a nod to John Maynard Keynes, bonds are dead in the long run anyway. Well, at least according to Moody’s Investors Service they are. The credit ratings company put out a research report Monday saying the rising tide of populism spreading round the world has caused it to turn “negative” on global sovereign credit for 2020. Unpredictable domestic and geopolitical risks along with a push for populist policies that weaken institutions, help slow growth and boost the risk of economic and financial shocks means governments will struggle to address credit challenges, Moody’s wrote. That’s scary, but the major ratings companies aren’t known for their astute political science observations. Yields on 10-year Treasury notes are lower now than when S&P Global Ratings stripped the U.S. of its AAA rating in August 2011.GO BIG OR GO HOMEThe thing about bond sell-offs in recent years is that have tended to be short-lived, thanks largely to central banks. The collective balance sheet assets of the Fed, European Central Bank, Bank of Japan and Bank of England rose to 35.7% of their countries’ total gross domestic product in October from about 10% before the financial crisis, according to data compiled by Bloomberg. And judging by some of the latest moves made by the ECB, bond traders can be a little less worried about a lack of buyers. The ECB started its second round of corporate bond purchases by acquiring in a week an amount that analysts expected it to buy in a month, according to Bloomberg News’s Tasos Vossos. The central bank bought almost 2.8 billion euros ($3 billion) of company debt securities in the week to Nov. 8, according to data released Monday. It was the second-largest weekly purchase figure since the ECB first adopted the strategy, known as quantitative easing, in June 2016. The bank suspended the program last December and restarted it at the beginning of this month as growth flagged across the euro area. It’s unknown whether the faster pace of purchases is in response to the big drop in bond prices and corresponding jump in yields, but it should be comforting to know that the ECB is doing its part to stem the weakness.CHILE GIVES INIt’s becoming routine to see the Chilean peso leading the list of biggest losers in the foreign-exchange market on any given day, and Monday was no exception. The peso weakened 1.72% to a record low, bringing its depreciation since Oct. 18 to 6.39%. To put that into context, the next biggest loser among the 31 major currencies tracked by Bloomberg, the Argentine peso, has dropped just 2.48%. It’s well known by now that the populist movement that Moody’s warned about on Monday has erupted in Chile, where a wave of protests has disrupted the economy and government. The latest move lower in the peso came as the administration of President Sebastian Pinera said it would overhaul the constitution drawn up during the dictatorship of Augusto Pinochet to calm three weeks of mass protests. So why did the peso and Chile’s equity market, which fell 1.52%, take it so harshly? Many people regard the constitution, drawn up under the dictatorship of Pinochet, as the foundation of an economic system that privatized pensions and much of health care and education, a chief grievance of protesters, according to Bloomberg News’s Javiera Baeza and Eduardo Thomson. It also enshrined the strict legal safeguards to private property that are behind Chile’s water privatization, a controversial subject in a country struggling with severe droughts.NATURAL GAS STUMBLESThe natural gas market cares little about trade wars or populism. To traders there, it’s all about the weather. Natural gas futures slid the most since January as forecasts showed that a cold snap descending on the U.S. would peter out by the end of the month, curbing demand at the time of year when consumption of the heating gas usually surges, according to Bloomberg News’s Christine Buurma and Naureen S. Malik. Gas was the worst-performing major commodity Monday, tumbling as much as 6.1%. Temperatures will probably be mostly normal in the eastern half of the country Nov. 21 through Nov. 25 as an autumn chill fades, according to Commodity Weather Group LLC. Beyond the weather, the slide in natural gas underscores how record production from shale basins continues to weigh on the market even as exports soar and the power industry becomes more reliant on the fuel. Without a sustained Arctic chill this winter, stockpiles will remain above normal for the time of year, pressuring prices lower, according to Buurma and Malik. As they point out, hedge funds are adding to the bearish momentum, holding the largest short position since 2015 for the time of year.TEA LEAVESWhen the National Federation of Independent Business said a month ago that its small-business sentiment index for September fell to near the lowest level of  Trump’s presidency, it noted that the part of the gauge measuring “uncertainty” plunged to its lowest since February 2016. “More owners are unable to make a statement confidently, good or bad, about the future of economic conditions,” the group said, with 30% of respondents reporting “negative effects” from tariffs. Don’t expect much improvement when the group provides an update on Tuesday. The median estimate of economists surveyed by Bloomberg is for a reading of 102 for October, little changed from 101.8 in September. Bloomberg Economics points out that small-business activity has been moderating since the last report. Most notably, the ADP private employment survey indicated recently that net hiring has shrunk to half the pace that prevailed last year, to the slowest since 2011.DON’T MISS Buying Stocks at Records Works Until It Doesn’t: Robert Burgess Investors’ Global Turn Depends on Policy Hopes: Mohamed El-Erian Delaying the IPO Process Weakens Capitalism: Stacey Cunningham U.S. Economy Has Recovered, But Labor Market Hasn’t: Karl Smith The 2020 Economy Should Feel a Lot Better Than 2019: Conor SenTo contact the author of this story: Robert Burgess at bburgess@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Bloomberg

    India’s Economy Needs More Than Prayers

    (Bloomberg Opinion) -- Over the weekend, India’s Supreme Court pronounced on a title dispute in Ayodhya, a small town in India’s northern state of Uttar Pradesh. Like many other property cases in India, this one had been working its way through the judicial system for decades. But it may be the most consequential such dispute in Indian history.Millions of Hindus believe Ayodhya was the capital of Ram, an avatar of Vishnu and hero of the epic Ramayana, and the dispute was over rights to the site where Hindus say a 16th century mosque was built over Ram’s birthplace. Reversing a lower court’s order that the area be divided between the two sides, judges awarded it entirely to the Hindu applicants, while saying Muslims must be compensated with land elsewhere.The dispute is inextricably entwined with national politics and the status of Indian secularism. It exploded into the national consciousness in the 1980s and early 1990s, when both the then-ruling Indian National Congress party and today’s ruling Bharatiya Janata Party laid claim to Ram’s heritage. Congress Prime Minister Rajiv Gandhi had the locks on the mosque broken open and began an election campaign from the town.Meanwhile, BJP leaders launched a nationwide “rath yatra” -- a pilgrimage in a bus decked out to look like a chariot -- intending to gather support for replacing the mosque with a Hindu temple. (One of the local organizers of the rath yatra was a young man named Narendra Modi.) Finally, amid the escalating tensions, a mob of Hindu activists physically demolished the medieval mosque in 1992 as the state police -- controlled by the local BJP administration -- stood by or ran away. That defiant act of violence marked the beginning of the long rise of the BJP to absolute power in India.Today, after the Supreme Court awarded the BJP-run central government the right to set up a trust to administer the process of Hindu worship at this long-disputed site, it is worth noting how effectively and efficiently Modi’s party has moved forward on the core aspects of its ideological agenda. For decades, the Hindu nationalist wing of Indian politics has mobilized around certain key issues: the banning of cow slaughter, the building of a temple at Ayodhya, combating the perceived demographic threat to Hindus from migration or conversion, and denying autonomy to India’s Muslim-majority state of Jammu and Kashmir.On each of these, in just the few months since Modi was reelected as prime minister with an enhanced majority earlier this year, there has been significant progress. A temple will be built at Ayodhya; Kashmir has had its special status revoked; a project to disenfranchise all “foreigners” in the border state of Assam has been concluded and may be extended to the rest of India. A national law effectively banning religious conversion may not be far off, while violence from self-styled “cow protectors” has also been widely publicized.The speed and energy with which the BJP’s social agenda has been implemented stands in sharp contrast to the dilatory and timid approach the government has taken to structural economic reform. When Modi was first elected in 2014, many hoped that he would instead focus on the economy over social issues, as the BJP had done during its previous stint in power in New Delhi (remember the slogan, “build toilets before temples?”).But the Modi government has clearly prioritized foreign affairs and domestic social change. While some major reforms have been introduced, including a new bankruptcy code and a nationwide goods-and-services tax, other long-pending measures that would improve Indian competitiveness have been postponed or avoided. Loss-making or unproductive state-owned companies have not been shut down or sold, for fear of the political fallout. This reluctance to reform has persisted in spite of a dramatic and self-inflicted economic slowdown, reflected last week in Moody’s decision to downgrade the outlook for India to negative.The question is what Modi chooses to do after this victory. With so much progress to tout on the Hindu nationalist agenda, will he now feel he has the political space for bold economic reform? This is what many of those who continue to be optimistic about his tenure argue. And Modi himself continues to frame the government’s social program carefully, as part of the natural and impartial settling of long-pending issues rather than as the beginning of a new radical agenda.But such hopes have been continually raised since 2014 and mostly been disappointed. The only rational conclusion is that Modi and his party feel that remaking Indian society is more important than remaking the economy. Perhaps they have been elected more on the basis of the social issues the BJP has espoused since its founding decades ago than on nebulous hopes of economic progress. Or perhaps they’re just true believers themselves. To contact the author of this story: Mihir Sharma at msharma131@bloomberg.netTo contact the editor responsible for this story: Nisid Hajari at nhajari@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Mihir Sharma is a Bloomberg Opinion columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of “Restart: The Last Chance for the Indian Economy.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • U.S. Productivity Unexpectedly Posts First Drop Since 2015
    Bloomberg

    U.S. Productivity Unexpectedly Posts First Drop Since 2015

    (Bloomberg) -- Productivity in the U.S. unexpectedly posted the first decline in almost four years and labor costs accelerated, suggesting a pickup in efficiency earlier this year was more of a temporary shift.Nonfarm business employee output per hour decreased at a 0.3% annualized rate in the third quarter, according to Labor Department figures Wednesday. That compared with the median projection for a 0.9% increase in Bloomberg’s survey of economists and followed an upwardly revised 2.5% gain in the second quarter. Unit labor costs rose at a 3.6% rate following 2.4% in the prior period.The decline in productivity resulted from a 2.1% increase in output against a 2.4% rise in hours worked. The Labor Department said self-employed workers “made an unusually large contribution” to the increase in hours worked during the quarter and those particular numbers can be more volatile than for the broader workforce. The number of self-employed Americans had risen from the prior quarter.That increase “likely depressed productivity more than we were anticipating,” said Ryan Sweet, director of real-time economics at Moody’s Analytics. “The trend overall for productivity is still mediocre at best and that suggests that the economy’s potential growth rate hasn’t really changed too much.”While the report partly reflects a deceleration in economic growth during the quarter, it raises questions about whether the Trump administration’s tax cuts -- which took effect last year -- will sustain a pickup in productivity after already showing signs of failing to prop up business investment.The quarterly figures tend to be volatile. But productivity gains have been generally weak during the expansion that began in 2009, and the data may represent a return to this pattern after a relatively strong first half.Broader DebateThere is debate over what has driven the broader slowdown in productivity compared with prior decades. Federal Reserve Chairman Jerome Powell, in a recent speech, suggested several possible reasons, including that official statistics may understate productivity growth by failing to capture the value of fast internet connections and smartphones.Fed Vice Chairman for Supervision Randal Quarles sees new technologies such as artificial intelligence and 3-D printing as having the potential to boost efficiency. Quarles said last week that he was “heartened” by the first-half pickup in productivity growth after years of “abysmal” gains, noting that the trend gave him optimism for the economy’s longer-term potential.From a year earlier, productivity rose 1.4%, down from 1.8% in the prior period. Unit labor costs were up 3.1% year-over-year -- the fastest since early 2014 -- which could be a sign that a tight job market is filtering through to what companies are spending on wages.“That’s going to put some further pressure on corporate profit margins, which already are compressing,” Sweet said. “That could become more problematic for business investment, hiring down the road.”The report showed inflation-adjusted hourly compensation rose at a 1.4% annual pace during the quarter after a 2% increase.(Adds economist’s comments starting in fourth paragraph.)\--With assistance from Kristy Scheuble.To contact the reporter on this story: Reade Pickert in Washington at epickert@bloomberg.netTo contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff KearnsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • India Won’t Waive $13 Billion of Mobile-Phone Firms’ Dues
    Bloomberg

    India Won’t Waive $13 Billion of Mobile-Phone Firms’ Dues

    (Bloomberg) -- India won’t back down from collecting $13 billion of past dues from debt-laden telecom carriers because the industry is not under stress, a government official with knowledge of the matter said, a move that could deepen Bharti Airtel Ltd. and Vodafone Idea Ltd.’s financial woes.India expects the carriers to pay up within 90 days as ordered by the Supreme Court last month, the official said, asking not to be identified, as the discussions are private. A panel of top bureaucrats could look at deferred payment plan for some of the dues, the person said.The government’s stand about the health of the industry mirrors comments made by billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd., which has said it has a “divergent view” from its rivals. High fees, frequent flip-flops and endless tax demands over the years have driven most operators aground. From over 10 operators few years ago, India has just three non-state players left with two of them saddled with a mountain of debt.Vodafone Group Plc’s Indian venture has $14 billion worth of obligations, while Bharti Airtel is rated junk by Moody’s Investors Service. “All telecom operators have asked for requisite help in reducing” the financial stress, Vodafone Idea said last month.The “extraordinary scenario” being shown is “just a machination to extract relief,” Reliance Jio said in a letter to the minister of communications on Oct. 31.Bharti Airtel’s shares fell 3.3% in Mumbai on Wednesday. Vodafone Idea lost 8.3% while Reliance Industries Ltd. slid 0.9%. The benchmark S&P BSE Sensex rose 0.6%.In the latest instance, the court ordered operators to pay dues using a disputed method for calculating the annual adjusted gross revenue, a share of which is paid as license and spectrum fees. It upheld the government’s method that includes income from non-telecom businesses like dividend from income and capital gains from the sale of assets while rejecting a plea to exclude them.Spectrum PaymentStill, the official said the government is working on a plan to reduce the license fee and providing a two-year moratorium on pending spectrum payments. The proposal will be sent to the finance ministry first before it is taken up by the cabinet, the official said, adding that this may happen in the current financial year.The telecom ministry spokesman didn’t immediately respond to requests for a comment.A panel of senior government officials is examining feasibility of deferring payment for airwaves that are due by March 2021 and March 2022 as demanded by telecom companies, a government official told reporters last week. It will also consider the demand for reduction in spectrum usage levies and the Universal Service Obligation Fund charge.On the introduction of 5G airwaves, the official said there will be no delay in auction, which is due this financial year, and that the government isn’t presuming the telecom sector is under stress. The reserve price for 5G spectrum will not be lowered, he said.India has fallen behind China and some other countries in plans to introduce 5G, super fast networks seen as essential to developing factory automation, autonomous driving and other artificial intelligence applications.(Update with share performance in sixth paragraph)To contact the reporter on this story: Ragini Saxena in Mumbai at rsaxena30@bloomberg.netTo contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net, Unni Krishnan, Sam NagarajanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Which Companies Recently Raised Guidance?
    Yahoo Finance

    Which Companies Recently Raised Guidance?

    Third-quarter EPS season is in the homestretch, with blue-chip Utilities, Financial Services, Consumer and Industrial companies all releasing reports. Through 11/1/2019, Refinitiv reported that 356 S&P 500 companies have now announced 3Q earnings, with 76% coming in above consensus, ahead of the past four-quarters average percentage of 74%. The better-than-expected results have improved the overall forecast for the quarter to a -0.8%, from -3.2% at the start of the reporting season. Our analysts are always on the lookout for companies that raise their outlooks during earnings season. Management’s ability to “raise guidance” can often be a catalyst to strong returns in the quarters ahead. Following are 12 BUY-rated companies in Argus coverage for which management has raised guidance during the current EPS reporting season.

  • What Economic Forecasts of Trump’s Re-Election Are Missing
    Bloomberg

    What Economic Forecasts of Trump’s Re-Election Are Missing

    (Bloomberg Opinion) -- Election forecasts that use economic conditions rather than polls of voters suggest that President Donald Trump’s re-election chances are much higher than his abysmal approval rating suggests. Take them with a grain of salt. The U.S. economy is steady overall, but conditions in several battleground states continue to deteriorate — and so will Trump’s chances if those trends persist.The underlying premise of these models is that the economy matters a lot more, and candidates a lot less, than most people think. That’s probably correct. Trump was unpopular with much of the electorate in 2016, and virtually all conventional polls predicted Hillary Clinton would win. By contrast, economy-centric models predicted a Republican victory based on a mini-recession in 2015.The intuition is straightforward: Most voters are not up for grabs and simply support their party’s nominee. The few voters who are genuinely undecided are either unaware of or immune to political rhetoric, and cast their ballot based on what they see in their own lives. That view is dependent on the state of the economy.The flaw in this set of models is that they fail to account for regional variations in the economy. They also tend to focus on a narrow snapshot of conditions or ignore the importance of the Electoral College.So what are the models saying now about the 2020 election? Two look only at the popular vote share between the two major parties. One, by the economist Ray Fair, plugs in the latest economic data to give a sort of horse-race analysis. That shows Trump winning by four percentage points. The other, by Oxford Economics, projects what economic conditions will be in fall 2020 and projects a five-point win for the president.A third model, from Moody’s Analytics, gives a more detailed analysis of the Electoral College vote but relies heavily on such measures as gas prices and the stock market, which can change dramatically. This model currently predicts that Trump could win as many as 351 electoral votes.Again, these models are a valuable addition to pure political polling. That said, a look at trends in crucial battleground states shows the outlook for the president is far murkier. If he is going to retain the White House in 2020, Trump will have to hold on to at least three of six battleground states that he won in 2016: Michigan, Pennsylvania, Wisconsin, Florida, Arizona and North Carolina.In Arizona and Florida, the economy is doing well. Both states have seen job growth over the past year that was significantly higher than the national average. In Florida in particular, job growth has been trending upward.Things are a bit less bright in North Carolina. The latest reading on job growth was strong, but it appears to be an outlier. Overall, North Carolina’s job growth is tracking the national average — declining but strong enough to support the case for re-election. Crucially, while North Carolina’s economy has been traditionally dependent on manufacturing, it has made the transition to finance and technology, areas that are less affected by global trade.It’s in Michigan, Pennsylvania and Wisconsin that real trouble awaits the president. Job growth is not only slower there than the national average, but it is also declining steadily. Those economies are still heavily exposed to trade, in terms of both sales and investment. Just as important, Trump’s razor-thin margins in those states means that he has little room to spare.These economy-centric models are a useful corrective to the view that Trump’s poor polling and the results of the 2018 midterms mean that a Democrat will win the White House in 2020. It would be a mistake, however, to underestimate the president’s weakness on the economy in several crucial battleground states.To contact the author of this story: Karl W. Smith at ksmith602@bloomberg.netTo contact the editor responsible for this story: Michael Newman at mnewman43@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Karl W. Smith is a former assistant professor of economics at the University of North Carolina's school of government and founder of the blog Modeled Behavior.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Could Canceling Student Loans Be a Tax Cut 2.0?
    Bloomberg

    Could Canceling Student Loans Be a Tax Cut 2.0?

    (Bloomberg Opinion) -- Larry Kudlow, President Donald Trump’s top economic aide, said on Friday that he’s working on a plan to cut taxes for the American middle class that would be announced ahead of the 2020 election.In the eyes of Moody’s Investors Service, several Democratic presidential candidates already have a similar proposal.In a sweeping report on the potential impact of student-loan forgiveness on the U.S. economy and the government’s finances, analysts led by William Foster made this striking statement: “In the near term, we would expect student loan debt cancellation to yield a tax-cut-like stimulus to economic activity.” The idea is that because more than 90% of the debt has been issued or guaranteed by the federal government, lowering or erasing those interest payments is tantamount to slashing taxes owed to ultimately the same source.Even for a subject like student loans that has been poked and prodded from every direction, this framing is novel. But it makes sense that Moody’s, which assesses the creditworthiness of sovereign governments like the U.S., would draw such a parallel between tax cuts and student loan relief as forms of fiscal stimulus. As the analysts noted, universally canceling student debt would barely impact America’s national debt because Treasuries have already been issued to finance the loans. Rather, one issue is that the government would lose the revenue from loan repayments, which amounted to about 0.4% of gross domestic product in 2018.Admittedly, it’s somewhat laughable to call that a concern, given that the nearly $1 trillion U.S. budget deficit is already practically unprecedented for a period outside of recession or wartime. The Trump administration’s 2017 tax cut relied on the assumption that accelerated economic growth would cover lost revenue, yet real GDP growth in the third quarter was 1.9%, Commerce Department data showed last week, the second-slowest annualized pace since Trump was elected. Candidates like Senator Elizabeth Warren of Massachusetts, by contrast, have mostly specified how they plan make up the revenue lost from forgiving student loans (in her case, a wealth tax).A more pressing question about canceling student loans revolves around whether doing so targets the segment of the population that needs the fiscal boost the most. My fellow Bloomberg Opinion columnists have weighed in on this, with Michael R. Strain arguing Warren’s plan helps the well-off, while Noah Smith thinks her income-based repayment plan is a good start and necessary to alleviate the $1.5 trillion debt’s drag on economic growth.Other candidates have proposed a more targeted approach. Mayor Pete Buttigieg of South Bend, Indiana, for instance, has said he would eliminate the debts of students who attended “low-quality, overwhelmingly for-profit programs” that failed the federal gainful employment rules, which were meant to root out higher-education programs that leave graduates with excessive debt relative to their job prospects. Moody’s analysts seem to fall somewhere in between. Here’s the upside of forgiving student loans:“Increased student debt can explain about 20% of the reduction in homeownership rates among young adults between 2005 and 2014, likely a reflection of a student loan borrower's reduced ability to save for a down payment on a home or qualify for a mortgage. Limited savings can also delay the pace of household formation, as the costs of starting a family can be prohibitive without sufficient savings. Meanwhile, high delinquency among student loan borrowers also impairs credit scores, which can further weigh on an individual's ability to access the credit necessary to start a business or purchase a home.”That likely resonates with a lot of young adults. But Moody’s analysts give a nod to Strain’s view on who would get most of the benefits:“The stimulative effect of a total student debt cancellation on the economy will be partially diluted by the relatively high-income levels of the majority of beneficiaries. … Nearly two-thirds of outstanding education debt is held by households in the upper half of the U.S. household income distribution, whose balance sheets are relatively healthy and whose propensity to consume savings from debt relief is lower than for earners on lower rungs of the income distribution.”And to Buttigieg’s point about for-profit colleges in particular:“In 2016, 32% of bachelor’s degree recipients from for-profit institutions had debt loads of $50,000 or more, compared to just 7% and 12% of peers at 4-year public and private nonprofit institutions, respectively. Although for-profit institutions educate less than 10% of U.S. undergraduates and graduates, their students represent nearly one-third of delinquent federal loan borrowers and are twice as likely to have delinquent loans than their counterparts at public and private nonprofit peer institutions.”I’m not in the business of opining on policy proposals. As Moody’s notes, the issues around the “moral hazard” of loan forgiveness are real and deserve to be debated publicly among elected officials.But from my vantage point within financial markets, the concept of student-loan forgiveness as a sort of tax cut is intriguing. Much of the talk among investors lately has centered on the limits of monetary policy and how governments are going to have to step up and do more to keep the economic expansion alive — or to combat the next downturn. I’ve written before that ultra-low bond yields are a sign that markets are begging for infrastructure spending, an oft-cited way to provide a fiscal jolt.Giving today’s young adults the chance to buy homes and start businesses sooner — like previous generations, before college costs exploded — might be an equally effective boost. After all, what good are interest rates at near-record lows to people who don’t take out mortgages or small-business loans? Morgan Stanley, for one, is counting on unshackled millennials and Generation Z to carry the U.S. economy and stock market for years to come.It’s starting to look as if a “tax cut 2.0” will be on the ballot in 2020. While that’s the language of the Republican Party, the Moody’s analysis is a reminder that there’s more than one way to reduce what some Americans owe the government and boost the U.S. economy in the process.To contact the author of this story: Brian Chappatta at bchappatta1@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • EM Review: Fed’s Rate Cut, Trade Hopes Ignited Relief Rallies
    Bloomberg

    EM Review: Fed’s Rate Cut, Trade Hopes Ignited Relief Rallies

    (Bloomberg) -- Emerging-market stocks rose for a fourth straight week last week and posted the best monthly advance since June, as the Federal Reserve confirmed investors’ expectations of a third-straight interest rate cut. While the U.S. central bank signaled a pause in further easing, appetite for higher yielding assets remained in place as signs of progress in the U.S. and China trade talks left investors more comfortable with taking risk. Developing-nation currencies strengthened for a fifth straight week.The following is a roundup of emerging-markets news and highlights for the week ending Nov. 3.Read here our emerging-market weekly preview, and listen to our weekly podcast here.Highlights:Federal Reserve officials reduced interest rates by a quarter-percentage point for the third time this year and signaled a pause in further cuts unless the economic outlook changes materiallyU.S. consumer spending trailed forecasts in September while weekly applications for unemployment benefits rose more than projected, offering a note of caution on the economyMeanwhile, U.S. hiring was unexpectedly resilient in October and prior months saw sharp upward revisions, validating the Fed’s signal of a pause from interest-rate cutsChina and the U.S. had a constructive conversation and achieved “consensus in principle” in a phone call between Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven MnuchinEarlier in the week, Chinese officials were casting doubts about reaching a comprehensive long-term trade deal with the U.S. even as the two sides get close to signing a “phase one” agreement, while President Donald Trump had said the U.S. was ahead of schedule to sign a very big portion of the China dealCommerce Secretary Wilbur Ross expressed optimism the U.S. would reach a “Phase One” trade deal with China this month and said licenses would be coming “very shortly” for American companies to sell components to Huawei Technologies Co. Trump on Sunday told reporters at the White House that a trade agreement, if one is completed, would be signed somewhere in the U.S.China secured the World Trade Organization’s go-ahead to impose $3.6 billion in sanctions against the U.S., in a case that predates the tariff war but may add a layer of tension to ongoing talksSenator Marco Rubio plans legislation to block U.S. government pensions from investing in Chinese stocks after the board overseeing the funds put off a decision that would add exposure to ChinaHouse Speaker Nancy Pelosi moved the Democrats’ impeachment inquiry of Trump into a new phase that signals the public soon will get a look at the witnesses and evidence being assembled to build a case against the presidentTrump’s presidency stands on its most treacherous ground after the House voted to approve and proceed with its impeachment inquirySouth Africa is heading for a debt trap as bailouts for the embattled state power utility drain the government’s coffers and anemic economic growth weighs on tax revenueFinance Minister Tito Mboweni presented a rapidly deteriorating outlook in his medium-term budget policy statement, with gross government debt seen surging to 80.9% of gross domestic product in the 2028 fiscal year unless urgent action is takenEskom Holdings SOC Ltd. will receive 138 billion rand ($9.2 billion) in bailouts through March 2022, or 10 billion rand more than previously allocatedSouth Africa dodged its third junk rating Friday -- something markets had been counting on for months -- as Moody’s Investors Service maintained the nation’s lowest investment grade score but revised its outlook to negative from stableFitch Ratings raised its outlook for Turkey’s sovereign assessment to stable from negative, citing an improving current account balance, continued economic growth and falling inflationLebanon’s Prime Minister Saad Hariri stepped down Tuesday after two weeks of anti-government protests descended into violenceCalls are mounting for Lebanon to impose formal restrictions on the movement of money to defend the country’s dollar peg and prevent a run on the banks when they open their doors after nationwide protestsThe yield on the nation’s dollar bond due 2021 climbed above 30%Asia:China’s ruling Communist Party warned that internal and external risks were increasing after wrapping up its most important meeting of the yearA gauge of the outlook for the country’s manufacturing sector dropped to the lowest level since February, underlining the weakness of an economy buffeted by weak domestic demand, shrinking profits, and the trade war with the U.S.South Korea’s semiconductor inventories fell the most in more than two years in September, signaling a potential end to a prolonged slump in tech demand that has weighed on global growthSamsung Electronics Co. reported earnings that beat estimatesFOMC rate cut will help maintain global growth trend and have positive impact on the South Korean economy, central bank Senior Deputy Governor Yoon Myun-shik saidExports plunged the most in almost four years while consumer prices failed to rise for a third straight month in October, highlighting continued pain in this Asian bellwether for global tradeThe U.S. won a case against India at the World Trade Organization alleging improper use of export subsidies valued at more than $7 billionIndia’s farmers’ organizations have planned a nationwide protest on Nov. 4 to demand that the government keep agriculture out of a 16-nation trade agreement currently being negotiated in ThailandFiscal deficit for April-September was 6.52 trillion rupees ($92 billion) versus 7 trillion rupees targeted in the budget for the financial year ending March 31India is committed to further improving its people-friendly tax regime, Prime Minister Narendra Modi said, as Asia’s third-largest economy seeks to attract more overseas investment to spur growthThe global slowdown and trade war have created an environment in which “low interest rates for longer” is the new normal, Bank Indonesia Governor Perry Warjiyo said. Separately, Warjiyo said the central bank’s monetary policy will continue to be data dependentIndonesia suspended exports of nickel ore with immediate effect after a planned ban on shipments from the beginning of next year led to a rush to beat the deadlineThe government warned it will revoke export licenses from mining companies that breach rules on shipping nickel ore as it steps up inspections ahead of an export banThe country’s state budget deficit is at 1.7%-1.8% as of September, while the government sees growth at between 5.08% and 5.1% this yearThailand will request a dialogue with the U.S. at the East Asia Summit due in November to regain scrapped trade benefits, Keerati Rushchano, the acting director general of the Department of Foreign Trade, saidPrime Minister Prayuth Chan-Ocha has asked the Foreign Ministry, Labor Ministry and Commerce Ministry to start talks with the U.S. to explain the country’s stance on labor issues as the nation to set up task force to restore trade preferencesThe value of foreign direct investment applications from China doubled during the first nine months of 2019 compared with a year earlierThe current-account balance narrowed in line with the trade surplus on falling gold exportsThe central bank said third-quarter economic growth may be lower than 2.9%Philippines plans to offer prize bonds in November as government seeks to tap liquidity in financial market after central bank’s reserve ratio cuts, Treasurer Rosalia de Leon saidThe Securities and Exchange Commission has asked Bangko Sentral ng Pilipinas to consider setting ceilings on the interest rates and other fees that lending and financing companies may imposeOctober inflation likely 0.5% to 1.3%, according to the central bankTaiwan’s economy in the third quarter grew at the fastest pace since the second quarter of last year as domestic investment and better-than-expected overseas demand helped avoid the worst of the U.S.-China trade warChina’s ban on individual travel to Taiwan could see visitors to the island fall for the first time since the devastating SARS outbreak of 2003. The number of mainlanders traveling to the island plunged 46% in September, according to data from Taiwan’s Tourism BureauThe Financial Supervisory Commission said it is raising the risk-capital charge for insurance firms buying exchange-traded funds that track foreign bonds but are denominated in local currencyThe U.S. Justice Department has struck a deal with fugitive financier Jho Low to recoup almost a billion dollars looted from Malaysian investment fund 1MDBMalaysia maintains claim of $7.5 billion from Goldman Sachs Group Inc. for the bank’s role in arranging bond sales for 1MDB, Finance Minister Lim Guan Eng saidThe country expects its credit rating to remain stable in the near future due to institutional reform, resilient economic growth as well as clear and consistent messaging to investment community, finance minister saidU.S. is unlikely to label the nation a currency manipulator, Finance Minister Lim saidVietnam slapped five-year tariffs on Chinese and South Korean color-coated steel products after domestic producers said unfair pricing from overseas competitors caused them to shut down production linesEMEA:South Africa’s government is talking with potential investors in the state-owned airline in an attempt to ease the continuing burden the company puts on the national budgetMozambique President Filipe Nyusi won a second term by a landslide in the natural-gas-rich nation’s Oct. 15 elections that the main opposition rejected as a “mega fraud”The Kenya National Assembly’s finance committee agreed to support President Uhuru Kenyatta’s decision to reject a bill that sought to retain caps on what banks can charge on loans, paving the way for the removal of a law that cut credit to businessesRussia’s biggest rate cut in two years was well flagged by Governor Elvira Nabiullina, but when it came, the move gave an extra boost to one of the strongest bond rallies in emerging markets this year, driving generic 10-year yields to their lowest since before the 2008 financial crisisFor all their talk about breaking Washington’s dominance, Russia and Turkey are still pretty hooked on the U.S. currency, according to data published by the Bank of RussiaTurkey’s central bank lowered its inflation estimate for the end of this year to 12% from 13.9%, citing a faster-than-expected slowdown in food prices and a stable liraTurkey offered to buy shares in Borsa Istanbul that the European Bank of Reconstruction and Development plans to sell following concerns over a convicted banker’s appointment to lead the benchmark stock exchangeBulgaria’s ruling party held on to the capital city in local elections, fighting off a challenge by the opposition-backed candidateShares in Saudi state oil giant Aramco will start trading on the Middle Eastern country’s stock exchange on Dec. 11, television news channel Al Arabiya reported, without identifying the source for the informationThe energy giant earned $68 billion in the first nine months of the year, cementing its position as the world’s most profitable company, according to people familiar with the figuresSaudi Arabia finally kicked off what could be the world’s biggest initial public offering, revealing potential tax cuts and dividends to lure investorsEgypt said it picked five banks, including JPMorgan Chase & Co. and Citigroup Inc., to manage a new dollar-denominated bond issuance in the 2019-20 fiscal yearA religious ruling in Kuwait against two initial public offerings launched in October is stirring fears that the Gulf state is clamming up at a time its bigger neighbor Saudi Arabia is doing just the opposite, courting investors in anticipation of Saudi Aramco’s IPOLatin America:Argentina’s President-elect Alberto Fernandez has six weeks to put the pieces of his cabinet puzzle together before starting a government that will have no shortage of economic problemsBonds slid after the vote and investors are now watching for the final composition of congress and how that may impact key legislation, including a debt restructuringAurelius Capital Management LP, one of the lead hedge funds that settled a massive litigation over defaulted bonds with Argentina in 2016, made a new claim in New York for $159 million it says the South American nation owes on securities tied to the performance of its economyArgentina lowered the floor on its key interest rate while defending its latest round of capital controls as a way to ease the transition period until Fernandez takes office Dec. 10Fernandez said he will put policies in place to boost manufacturing, including local textile and shoe producersBrazil’s central bank signaled it will stick with the current pace of monetary easing at its next meeting after lowering the key rate by a half point for the third straight time and forecasting inflation below target through 2021Industrial output rose less than expected in September as capital goods production dropped for the fourth straight month, signaling companies are still reluctant to investUnemployment rate unexpectedly held steady in the three months through September amid an increase in the number of people seeking workA Globo report on President Jair Bolsonaro being potentially linked to the murder of a lawmaker in Rio de Janeiro last year was quickly dismissed after prosecutors said that a key statement that supported the accusation was proved wrong during the investigationLower house Speaker Rodrigo Maia said the allegations do not “harm at all” the lower house agendaBolsonaro said he won’t attend the inauguration ceremony for his Argentine counterpart Fernandez in a fresh sign of souring ties between South America’s largest economiesMexico’s gross domestic product rose 0.1% in the third quarter from three months earlier, according to preliminary data -- that’s less than a 0.2% median analyst forecastU.S. companies and trade groups that want lawmakers to approve a new trade pact with Mexico and Canada are making the unusual bet that the impeachment drama in Washington could actually help get the deal through CongressHouse Speaker Nancy Pelosi said the new Nafta deal is the “easiest trade deal that we’ve ever done”Chile’s President Sebastian Pinera fired eight top officials, including the interior, finance and economy ministers, after 10 days of riots, protests and reprisalsMore violence erupted in Chile and dozens of citizens have been partially blinded by rubber projectiles and gas canisters that police and soldiers fired into crowds of protestersMany Chileans are clamoring for a solution that sends shivers down the spine of part of the country’s elite: a new ConstitutionColombia’s central bank defied the emerging market trend for interest rate cuts and left borrowing costs unchanged at its October meetingUruguay’s presidential candidate from the leftist coalition that’s governed the country for almost 15 years faces an uphill battle to win over at least part of the majority of voters who supported right-wing candidates in Sunday’s election before a November runoffTwo people died in clashes over the results of Bolivia’s Oct. 20 election in the latest episode of political violence that’s flared across South AmericaVenezuela gave El Salvadoran diplomats just 48 hours to leave the country after a similar move by El Salvador’s President Nayib Bukele\--With assistance from Selcuk Gokoluk and Carolina Wilson.To contact Bloomberg News staff for this story: Yumi Teso in Bangkok at yteso1@bloomberg.net;Netty Ismail in Dubai at nismail3@bloomberg.net;Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.netTo contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Cormac MullenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • A Mega-Merger Can't Hide $12 Billion of Debt
    Bloomberg

    A Mega-Merger Can't Hide $12 Billion of Debt

    (Bloomberg Opinion) -- China has a standard road map for fixing state-owned giants that have gone off the rails: Create an even more inflated behemoth through a mega-merger, in the hope that the stronger business will be able to prop up the weaker one until the storm blows over.It’s a playbook that’s been followed in steel, shipping, energy and rolling stock — but in the chemicals industry, it’s not working. The country is planning to abandon the long-mooted merger of chemicals giants Sinochem Group Co. and China National Chemical Corp., or ChemChina, the Financial Times reported Thursday, citing people close to the matter it didn’t name. Executives at the two companies had clashed and Sinochem is likely to just buy some of ChemChina’s better assets instead, the newspaper reported.It might seem remarkable that after about three years of will-they-won’t-they rumor, bosses at the two companies can’t get along. After all, both have the same chairman in Frank Ning, a Pittsburgh-educated dealmaker who ran state-owned grain trader Cofco Corp. before being brought into Sinochem in 2016. He was put atop ChemChina after its entrepreneurial boss Ren Jianxin retired last year.Still, it’s not hard to see why calling off the engagement makes sense for Sinochem, which has the better returns and lower debt levels. For ChemChina, with 83.37 billion yuan ($12 billion) of debt maturing next year and a negative 9.98 billion yuan of operating cash flows in the year through June, the prospects look tougher. The two companies have had opposite approaches to making a profit in the fundamentally low-margin business of selling chemicals and fertilizers in a country where the government wants industrial and agricultural costs to be low.Sinochem diversified into real estate and leasing, spinning off the property developer China Jinmao Holdings Group Ltd. and leasing firm Far East Horizon Ltd. into listings in Hong Kong. Jinmao’s net income of 5.2 billion yuan last year isn't far from the 6.5 billion yuan total for Sinochem’s main entity, and the chemicals company has brought in more cash from the business in recent months by selling off a stake to local life insurers.ChemChina took a more globetrotting approach, making a splashy overseas deal for tire maker Pirelli & C. SpA followed by the $46 billion takeover of Swiss agribusiness giant Syngenta AG in 2016, when checkbooks for connected Chinese dealmakers were wide open. As the country has moved toward deleveraging in the years since, that strategy seems to have been its undoing. Net debt more than doubled as a result of the Syngenta deal, overwhelming the ability of the investment to pay for itself. ChemChina’s adjusted debt at the end of 2018 was 10 times Ebitda, according to Moody’s Investors Service, well above figures that would be considered conservative. China’s ambassador to Switzerland in June described the deal as a mistake, an extraordinarily frank assessment from such a figure.Things are likely to come to a head shortly. ChemChina’s 2020 debt maturities alone are equivalent to all the Sinochem debt maturing out to the start of 2029, according to data compiled by Bloomberg. After that there’s another 71.52 billion yuan to deal with in 2021 and 66.48 billion yuan in 2022, the data show.One way around this would be the relisting of Syngenta, which could happen as soon as mid-2020 — but even selling half the business back onto the market at something close to the 2016 takeover price would represent an Alibaba Group Holding Ltd.-size share sale. That’s no easy task in the best of times; and given the signs of a deteriorating global economy there’s no guarantee that ChemChina could pull it off.That could help explain why the company was holding out hope for a merger, but it’s understandable that Sinochem isn’t keen to see its debt blown up by another business. Its net debt at the end of 2018 was about 5.4 times Ebitda — a tolerable number by the standards of state-owned Chinese giants. Adding ChemChina to that total would have pushed the figure up to 7.5 times, far more risky territory.No wonder the chemistry in this deal is lacking.To contact the authors of this story: David Fickling at dfickling@bloomberg.netNisha Gopalan at ngopalan3@bloomberg.netTo contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Markets Are Feeling Fine About a Fed Pause
    Bloomberg

    Markets Are Feeling Fine About a Fed Pause

    (Bloomberg Opinion) -- We’ve been underestimating the stock market all along. There’s been a strong case to be made that this year’s rally — in the face of a slowing economy and stagnant earnings growth — was due solely to the Federal Reserve’s dovish pivot back in January and subsequent interest-rate cuts. But on Wednesday, the S&P 500 Index rose to a new record even though the central bank strongly hinted it sees no reason to ease monetary policy further.The biggest indication that the Fed feels it’s time to pause after reducing its target rate for overnight loans between banks three times since July was the absence in its statement of the phrase that it would “act as appropriate to sustain the expansion.” Those words have been a way of signaling that markets can expect lower rates. So why not a stronger reaction after that phrase was taken out? There are two ways to interpret this: One is that investors know a lot could happen between now and the next monetary policy meeting Dec. 10-11 that could persuade the Fed to lower rates again. The second is that the Fed has provided just the right amount of “insurance” to avoid recession anytime soon. Yes, growth has slowed, but the latest data doesn’t suggest a material worsening in conditions, especially among consumers, which account for more than two-thirds of the economy. That was evident in the government’s report on gross domestic product for the third quarter that was released earlier in the day. It showed the economy expanded at a 1.9% annualized rate, topping forecasts in a Bloomberg survey that called for 1.6% growth. Consumer spending came in at a 2.9% rate, exceeding projections for a 2.6% increase and more than offsetting the biggest drop in business spending since 2015.To be sure, there are still a lot of concerns about equities, starting with valuations. The S&P 500 is now trading at an expensive 20 times earnings, the most since stocks began their steep plunge in last year’s fourth quarter. And Wall Street strategists on average seem reluctant to boost their market forecasts with earnings estimates for this quarter and 2020 starting to come down. The median estimate of about 25 Wall Street strategists surveyed by Bloomberg earlier this month was for the S&P 500 to end the year at 3,000. It finished Wednesday at 3,046.77.BOND TRADERS ARE HAPPYPerhaps an even bigger surprise than stocks was the reaction in the bond market. Although U.S. Treasuries came off their highs for the day, they still ended up with a gain, which means yields fell. Those on benchmark 10-year notes fell 6 basis points, or 0.06 percentage point, to 1.78%. To be sure, those yields had advanced from around 1.53% earlier this month in a sign that bond traders had expected the Fed to signal that this rate cut would be the last unless the economy got noticeably worse. Markets will find out soon enough whether the Fed was right to signal that a pause is warranted; on Friday, the government releases its unemployment report for October and the Institute for Supply Management releases its monthly manufacturing index. The jobs report is forecast to show that businesses added 85,000 workers this month, down from 136,000 in September and one of the weakest readings in years. The ISM index is expected to rise to 49 from 47.8, but that would still leave it below the critical 50 level that marks the dividing line between contraction and expansion. “The uneven nature of the data will keep the discussion of a December rate cut at the Fed fruitful at the very least,” Lindsey Piegza, the chief economist at Stifel Nicolaus in Chicago, wrote in a research note. There was one small sign from the bond market that perhaps the Fed is making a mistake. That’s seen in the yield curve, where the gap between two- and 10-year rates narrowed by about 3 basis points to 17 basis points in a traditional sign that traders anticipate lower growth.CANADA’S CURRENCY WARBank of Canada Governor Stephen Poloz, one of the few major central bankers in the world to resist the push toward easier monetary policy, did what was expected on Wednesday and acknowledged that he’s considering the merits of joining other countries in lowering interest rates. What was unexpected, though, was an explicit mention of the strength of Canada’s dollar in the central bank’s official statement, suggesting to some that policy makers see a weaker currency as key to a stronger economy. It’s rare to see the Bank of Canada single out the so-called loonie. As such, traders pushed the currency lower, making it the biggest loser among its developed-market peers. The Bloomberg Correlated-Weighted Index that tracks the Canada dollar against nine other major currencies fell as much as 0.94% in its biggest drop in a year. Measured by that index, the loonie had advanced about 7.50% this year through Tuesday to its strongest since early 2015, making the gain the biggest of the group. The lower currency is a relief, given that Canada’s economy isn’t exactly going gangbusters. Economists expect growth to slow to 1.5% over the next two years, slightly below potential. The weakness in the currency may not last long. With the Fed lowering its lending benchmark to a range of 1.50% to 1.75%, Canada now has the highest policy rate in the developed world at 1.75%, which could lure foreign capital and therefore prop up the loonie.CHILE’S TRAVAILS Markets are discovering that national protests are hard to stop once they gain momentum. That was made clear in Hong Kong, and now it’s happening in Chile. The nation’s benchmark stock index tumbled more than 3% on Wednesday, bringing its slide since Oct. 18 to about 9% as the biggest social unrest in a generation forced the government to cancel next month’s APEC summit in Santiago. That’s where President Donald Trump was expected to sign a preliminary trade accord with China. (The White House insisted that it would continue to press to finalize the “phase-one” agreement in coming weeks.) Chile’s peso was also a big loser, weakening as much as 3%. The nation’s economy has a reputation for being one of the more stable ones in Latin America in recent years, so in some ways, what’s happening in Chile is a bit unexpected. Any number of strategists have described the weakness in Chilean stocks, bonds and the currency as “overdone.” After all, the protests have their roots in a relatively minor 3% increase in subway fares. Even so, there are now calls for an overhaul of the country’s free-market economy that has produced what Bloomberg News describes as both vast wealth and vast inequality. The Chamber of Commerce warned that retail sales in Santiago probably fell more than 10% in October because of the unrest.SOME DEFICITS STILL MATTERSouth Africa is providing a fresh reminder that state-controlled enterprises are hardly the most efficient way of delivering services to an economy. The nation’s currency tumbled the most in the world on Thursday, and its government bonds also fell after the Finance Ministry released a statement showing that the country’s predominant electricity supplier, Eskom Holdings SOC Ltd., will receive 138 billion rand ($9.4 billion) in bailouts through March 2022, or 10 billion rand more than previously allocated. And that may not be all. The statement warned that extra support may be needed if plans to turn the utility around are delayed. That means South Africa’s government debt will top 70% of gross domestic product in the next three years, compared with a previous projection of 60.2% in 2024, according to Bloomberg News’s Dana El Baltaji and Selcuk Gokoluk. The issue for markets is that South Africa may be in imminent jeopardy of losing its final investment-grade credit rating from one of the three major credit ratings firms. Moody’s Investors Service is due to review South Africa’s Baa3 rating – the lowest investment grade - this week.TEA LEAVESThe U.S. Commerce Department’s first look at third-quarter gross domestic product released on Wednesday reinforced the notion that consumers are buttressing the economy. Consumer spending, the biggest part of the economy, increased at a 2.9% annualized rate and exceeded projections for a 2.6% rise. For businesses, though, nonresidential fixed investment fell the most since late 2015. What we don’t know is whether consumer spending was level throughout the quarter or started off strong before fading at the end. The answer may come Thursday, when the government reports on personal income and spending for September. Spending is forecast to have risen 0.3% last month after increasing 0.1% in August and 0.5% in July. There’s one big reason to be cautious: Two weeks ago the Commerce Department said retail sales for September fell 0.3% in September from the prior month, shocking economists who had forecast a 0.3% increase. DON’T MISS Fed Needs to Do More Than Just Head Off a Recession: Karl Smith Low Rates and Low Inflation? Not on Main Street: Brian Chappatta Could Dollarization Be Argentina’s Salvation?: Mac Margolis Indonesia Does Its Best to Scare Off Investment: David Fickling Authers' Newsletter: Markets' Brief Brexit Calm Is About to EndTo contact the author of this story: Robert Burgess at bburgess@bloomberg.netTo contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Rand Sinks After South Africa Spells Out Burden of Saving Eskom
    Bloomberg

    Rand Sinks After South Africa Spells Out Burden of Saving Eskom

    (Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on TwitterThe rand plummeted and bonds extended declines as investors faced the reality of what bailouts for the embattled state power utility will cost South Africa.The currency retreated 2.95%, the most since September and the biggest drop in emerging markets, to 15.05 per dollar as of 10:30 a.m. in New York. The yield on local-currency debt due 2026 jumped 23 basis points to 8.44%.Eskom Holdings SOC Ltd. will receive 138 billion rand ($9.4 billion) in bailouts through March 2022, or 10 billion rand more than previously allocated, according to the medium-term budget policy statement released by Finance Minister Tito Mboweni on Wednesday. He warned that extra support may be needed if plans to turn the loss-making utility around are delayed.That means South Africa’s government debt will top 70% of gross domestic product in the next three years and may continue rising as bailouts for state-owned companies boost spending, according to the National Treasury. The ratio was previously projected to rise to 60.2% in 2024, before decreasing in subsequent years.Ratings RiskWithout plans to contain the fiscal deficit, the nation’s credit ratings may be imperiled. Moody’s Investors Service is due to review South Africa’s score this week and is the only major ratings company to still assess it at investment grade.“This increase in debt under the weight of the Eskom bailouts, together with lingering uncertainty over Eskom debt restructuring and a weaker economic growth outlook means a revision of the rating outlook from Moody’s to negative is a strong possibility,” said Natalie Rivett, a senior emerging-markets analyst at Informa Global Markets in London.A combination of bailouts for government firms, declining economic growth and falling tax revenue will cause the budget deficit to widen to 5.9% of gross domestic product in the fiscal year, according to the budget statement.“The South African rand is traveling back toward the 15 level as the medium-term budget statement compounds investors fears,” said Simon Harvey, a London-based market analyst at Monex Europe Ltd. “Ballooning projected debt-to-GDP levels, increased government support for Eskom and a widening budget deficit don’t bode well for an economy struggling for growth while under the microscope of both foreign investors and rating agencies.”(Updates with currency, bond moves in second paragraph.)\--With assistance from Netty Ismail and Justin Villamil.To contact the reporters on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net;Selcuk Gokoluk in London at sgokoluk@bloomberg.netTo contact the editors responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net, Alex Nicholson, Carolina WilsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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  • Is Moody's Corporation (NYSE:MCO) Overpaying Its CEO?
    Simply Wall St.

    Is Moody's Corporation (NYSE:MCO) Overpaying Its CEO?

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  • After WeWork, the Market is Concerned About SoftBank's Massive Debt Load Again
    Bloomberg

    After WeWork, the Market is Concerned About SoftBank's Massive Debt Load Again

    (Bloomberg) -- Concern about SoftBank Group Corp.’s massive debt load has reared its head again after the company unveiled a $9.5 billion bailout for WeWork last week, hurting its shares and bonds.While the price tag for SoftBank to rescue the debt-riddled U.S. shared-office startup isn’t seen as big relative to its total investment portfolio, concern is growing about the impact on its leverage. Analysts expect its loan-to-value ratio, a key metric looking at its net interest-bearing debt against the value of investments, to rise as a result of the WeWork acquisition, though they generally see it staying below the company’s target.“This announcement is a fundamental credit negative for SoftBank Group,” wrote Mary Pollock, a senior analyst at CreditSights, in a report. She said the deal will increase SoftBank’s LTV to 22.8%. Son has said he wants to keep that gauge below 25%. The gauge was at 18% as of Friday.SoftBank spokeswoman Hiroe Kotera said, “Our company’s financial policy has not changed.”Separate news also fueled concern about the value of the investment portfolio at billionaire Masayoshi Son’s firm, which could also affect the key LTV ratio. The company is planning to take a writedown to its Vision Fund of at least $5 billion to reflect a plunge in the value of some of its biggest holdings, including WeWork and Uber Technologies Inc., according to people with knowledge of the matter. Read more about that here.Rating companies haven’t changed their debt scores for SoftBank after the WeWork news. Moody’s Investors Service and S&P Global Ratings grade it as junk.The price of SoftBank’s most recent yen notes fell to the lowest since they were issued last month, and the cost to insure its debt against default touched the highest level since January.SoftBank’s shares dropped 6.6% last week, the worst performance in 2 1/2 months. Atul Goyal, an analyst at Jefferies, cut SoftBank to Hold on Friday, one of only two analysts out of 19 tracking the company to confer that rating.“SoftBank would be an interesting stock for gambling purposes as it’s volatile, but I don’t think it’s a stable investment product for fixed-income traders,” said Katsuyuki Tokushima, head of pension research of financial research department at NLI Research Institute.SoftBank is teeing up investments for the successor to its gargantuan Vision Fund. It’s in talks to back a pharmaceutical delivery startup, a company focused on robotic burger-making and a maker of lab-grown meat, according to people with knowledge of the matter. Vision Fund 2 is the next iteration of SoftBank’s first $100 billion fund.(Updates with more background.)To contact the reporter on this story: Ayai Tomisawa in Tokyo at atomisawa@bloomberg.netTo contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • WeWork's Savior Doesn't Have Such Deep Pockets
    Bloomberg

    WeWork's Savior Doesn't Have Such Deep Pockets

    (Bloomberg Opinion) -- SoftBank Group Corp.’s $9.5 billion bailout has rescued WeWork from the threat of bankruptcy. But make no mistake: The unicorn’s free-spending days are over. Its savior is far from a bottomless pit of money. While WeWork had an eye-watering $22 billion of debt at the end of June plus $47 billion of looming lease-payment obligations, its rescuer isn’t in such great shape either. SoftBank is a junk-rated issuer, with the equivalent of $62 billion in net debt. From now on, founder Masayoshi Son will have to manage his cash pile carefully.The Japanese company has done an excellent job of reinventing itself. Last December, S&P Global Ratings removed its negative outlook after SoftBank listed its domestic telecom unit. Moody’s Investors Service, meanwhile, relabeled the company as an investment firm. That means investors have started to evaluate SoftBank’s debt by comparing it to the market value of its investments, rather than to the company’s cash flow.Against the 26.6 trillion yen ($245 billion) value of its portfolio, SoftBank’s 6.7 trillion of net debt looks comfortable. Much of that is attributable to a 26% stake in Alibaba Group Holding Ltd., now worth about $116 billion. Last month, Moody’s shrugged off the resignation of Adam Neumann as WeWork’s CEO, noting that even a 50% devaluation of We Co. would only be about 1% of SoftBank’s investment portfolio. Likewise, SoftBank would be able to absorb potential writedowns of as much as $7 billion at the Vision Fund because of the value of its Alibaba stake.The WeWork rescue package is changing the game, though. In a statement last week, Moody’s adopted a stronger tone and drew the spotlight back to SoftBank’s cash management. The agency would consider a downward rating action if cash held at the conglomerate could no longer cover two years of debt maturities, it warned.So far, this has been a breeze for SoftBank. As of the June quarter, the company held 1.2 trillion yen of cash, comfortably more than the 550 billion yen of debt maturing over the next two years.It’s going to get tighter. SoftBank’s cash rose to about 2.5 trillion yen as of July, thanks to a tax refund and the sale of shares in Chinese ride-hailing unicorn DiDi Chuxing Inc. to the Vision Fund. Against that, SoftBank has to fund a WeWork bailout costing the equivalent of about 1 trillion yen and pay 1.3 trillion yen of debt coming due in the 2021 fiscal year. Son has also made $54 billion of pledges to four investment funds, Bloomberg Intelligence analyst Stephen Flynn estimates. Like WeWork, SoftBank is anything but a cash cow. Subsidiaries from U.S. telecom provider Sprint Corp. to British chipmaker ARM Holdings Inc. don’t generate much. As a result, SoftBank has to live off what’s on hand, proceeds from new bond sales, or dividends from its 66.5%-owned Japanese telecom business. In a pinch, the company could always sell investments to the Vision Fund, though the slide in shares of key holdings such as Uber Technologies Inc. and Slack Technologies Inc. has reduced the appeal of such disposals. Frustratingly, SoftBank’s shares in Alibaba aren’t publicly traded and the highly profitable Chinese e-commerce company doesn’t pay a dividend.It could be argued that SoftBank got WeWork at a distressed price and that once the shared-office startup’s liquidity crisis has passed, its valuation will rebound from the bailout tag of less than $8 billion. Don’t bet on it. If WeWork needs further significant financial support, the savior may struggle to provide it.SoftBank, meanwhile, looks likely to keep its bankers busy with plenty of refinancing work in the years ahead. To contact the author of this story: Shuli Ren at sren38@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • From Wyoming to Australia, Coal’s Heartlands Are Retreating
    Bloomberg

    From Wyoming to Australia, Coal’s Heartlands Are Retreating

    (Bloomberg Opinion) -- From the Rocky Mountains to the Rhineland and Australia’s Great Dividing Range, the great tide of the coal industry is receding.The entire Powder River Basin, the region spanning the states of Montana and Wyoming that provides about half of America’s thermal coal, is “distressed,” Moody’s Investors Service wrote in a report last week. All companies producing coal there are now focusing on mining coking coal elsewhere in the U.S., the ratings company wrote. Output “will likely fall significantly in 2020,” it said.Energy Information Administration forecasts quoted by Moody’s suggest that production from the Powder River-dominated Western Region will drop to 339 million short tons in 2020 from 418 million short tons in 2018, a 19% reduction and a 42% decline from 592 million short tons in 2010. Most of that decline happened while coal could still produce electricity more cheaply than renewable alternatives, a situation that’s now reversed. A comparable drop over the coming decade would shutter almost every mine in the basin. In Australia, the world’s second-largest coal exporter after Indonesia, similar trends are afoot. The pipeline of new renewables projects, led by solar farms, now stands at 133 gigawatts, according to research group Rystad Energy. Coupled with a flood of energy-storage projects coming online by 2025, that means that coal-fired generation could be extinct by 2040, the group said Tuesday. Changes under way in Europe are pointing in the same direction. Germany, long considered one of the rich world’s last redoubts of coal-fired power, is seeing generation plummet as the rising price of carbon credits and falling cost of gas squeeze out profits for generators. Germany’s current-year and next-year dark spreads, which represent the theoretical profit for coal-fired power based on prevailing fuel, electricity and carbon prices, have been in negative territory for much of the year. Generators RWE AG and Uniper SE are still able to eke out margins by utilizing carbon credits bought in former years when prices were in the region of 5 euros ($5.57) compared to their current 25.93 euros. Eventually, that stockpile will run out. Unless gas gets more expensive or carbon gets cheaper, the German government’s target for ending coal-fired generation by 2038 is likely to come 15 years or so early.Remarkably, this trend is even sweeping up brown coal, or lignite, a cheap-and-dirty variety that’s been seen as more resilient than Germany’s costlier black coal. Lignite generation in the six months through June fell 28% from a year earlier at RWE, a drop of 9.9 terawatt-hours.Even regions that were once viewed as the last hopes for coal demand are looking dicier. The pipeline of thermal power projects beginning construction in Southeast Asia has fallen to zero this year everywhere except in Indonesia. Even there, the capacity starting up is just 1,500 megawatts, equivalent to just five or six power plants, according to a report published Wednesday by Global Energy Monitor, a research group in favor of fossil fuel phase-out.The world has gone through a remarkable energy transition over the past decade, but much of the shift still lies, iceberg-like, beneath the surface. Renewables are cheaper than coal almost everywhere, a prospect that was considered so improbable at the time of the 2006 Stern Review on climate change that it wasn’t treated as a serious possibility beyond a vague hope that research and development might one day flip the script. The great hope for coal now is not that it will be able to survive in the free market, but that government support will come in to bail out an industry that can’t survive on its own, in the process locking in pollution-related disease and climate emissions for future generations.It’s not impossible that this bet will work in a few regions — as exemplified by the speech given last week to China’s National Energy Commission by Li Keqiang, in which the premier sang the praises of domestic coal deposits and stepped back from previous promises to accelerate deployment of renewables.Any industry that harms its consumers, pollutes the planet and depends for its survival on political support is living on borrowed time, though. The declines to coal-fired power on multiple continents are the death throes of a technology that’s rapidly heading towards obsolescence. Humanity will still struggle to reduce our emissions fast enough to avoid devastating climate change — but don’t be surprised if this industry falls even faster than people have dared to hope.(Corrects the eighth paragraph and “End of the Road” chart in column first published Oct. 24 to show that the figure refers only to projects that are starting construction.)To contact the author of this story: David Fickling at dfickling@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Amazon Tumbles as Profit Declines for First Time in Two Years
    Bloomberg

    Amazon Tumbles as Profit Declines for First Time in Two Years

    (Bloomberg) -- Amazon.com Inc.’s effort to get packages from warehouse to doorstep in a single day helped push the retail giant to its first year-over-year quarterly profit decline since early 2017.The spending binge isn’t over. Amazon Chief Financial Officer Brian Olsavsky said Thursday that the costs of the company’s one-day delivery push will total some $1.5 billion during the holiday quarter. Amazon’s projections for operating income and sales in the period fell short of analysts’ estimates, and shares slumped as much as 9.1% in extended trading.Amazon Chief Executive Officer Jeff Bezos has promised since the company’s initial public offering to invest for the long haul, and he is proving again his willingness to endure a little short-term pain in a bid to expand. Facing slowing growth in its core e-commerce franchise in recent years, Amazon in April announced an initiative to cut the delivery window on millions of items for paying members of its Prime subscription program. That’s helped reinvigorate sales, if at a high price.“Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year,” Bezos said in a statement. “It’s a big investment, and it’s the right long-term decision for customers.”The investments taking place across Amazon’s warehouses are “strategically necessary,” agreed Charlie O’Shea, an analyst at Moody’s Investors Service, but they “continued to weigh heavily” on the profitability of the retail business.Third-quarter net income narrowed to $2.13 billion, or $4.23 a share, from $2.88 billion, or $5.75, a year earlier, the Seattle-based company said in the statement. It was the first year-over-year decline since the second quarter of 2017. Analysts, on average, estimated $4.59 a share, according to data compiled by Bloomberg. Amazon projected operating income of $1.2 billion to $2.9 billion in the current quarter compared with analysts’ estimate of $4.31 billion. Sales will be $80 billion to $86.5 billion in the holiday period, the company said, suggesting the difficulty of sparking growth to Amazon’s levels of the past few years. Analysts projected $87.2 billion.Operating expenses during the third quarter climbed 26%, the steepest rise in more than a year, to $66.8 billion. Shipping costs soared 46% to $9.6 billion.Delivery is hardly the only place Amazon is investing.Olsavsky said the company continues to build out software development and sales and marketing teams for the Amazon Web Services cloud computing unit, and hire for roles supporting its devices business, streaming video unit and international operations.Amazon’s costs for technology and content -- largely salaries related to employees in research and development and infrastructure for AWS data centers -- jumped 28% to $9.2 billion. The company’s total workforce increased 22% to 750,000.The stock decline after the results were announced was enough to knock Bezos off his perch as the world’s richest man. At the nadir of extended trading, Bezos fell almost $5 billion behind Bill Gates, according to the Bloomberg Billionaires Index.Amazon also is facing increasing regulatory scrutiny, as the Department of Justice and Federal Trade Commission examine the practices of the largest U.S. technology companies. Amazon has so far avoided fines of the sort levied by the FTC on Facebook Inc. and by the European Commission on Alphabet Inc.’s Google, but investors are weighing the risks should the spotlight stay on the company. President Donald Trump and Democratic presidential hopefuls alike have publicly criticized Amazon.While the stock gained 19% this year to close at $1,780.78 in New York, it has fallen 12% since its July 15 high of $2,020.99. Investors had bid up Amazon shares on growing profits driven by AWS, services for third-party sellers and advertising.The cloud-computing unit remains Amazon’s cash cow. Sales rose 35% to about $9 billion in the third quarter. The unit’s operating income, $2.26 billion, accounted for more than two-thirds of Amazon’s total.Still, AWS’s growth was the slowest since Amazon began breaking out the unit’s performance.That was “absolutely” a concern for investors, said Tom Forte, an analyst at DA Davidson & Co. Amazon, which had a lengthy head start in building out a cloud-computing platform, faces steep competition now from well-funded rival offerings like Microsoft Corp.’s Azure and Google’s Cloud Platform.“You’re seeing some incremental competitive pressure from Microsoft” in particular, Forte said.Revenue gained 24% to $70 billion in the period ended Sept. 30. Analysts projected $68.7 billion.(Updates with analyst’s comments beginning in the 17th paragraph.)To contact the reporter on this story: Matt Day in Seattle at mday63@bloomberg.netTo contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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  • Sliding Equipment Orders Add to Growth Burden on U.S. Consumers
    Bloomberg

    Sliding Equipment Orders Add to Growth Burden on U.S. Consumers

    (Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Pocket Cast or iTunes.Two key measures of U.S. business investment posted declines that were worse than analysts expected in September, underscoring the burden on American consumers to carry growth in the second half.Orders for non-military capital goods excluding aircraft fell 0.5% in September after a downwardly revised 0.6% drop the prior month, according to Commerce Department figures Thursday. Shipments of such equipment matched the biggest drop since 2016, also missing estimates.The sustained weakness in orders is the latest sign the dimmer global growth outlook and trade tensions with China are weighing on companies, with some analysts lowering estimates of third-quarter gross domestic product due next week. The figures add to signs of malaise in business investment and potentially bolsters the case for a third straight Federal Reserve interest-rate cut, a move that traders expect from policy makers Oct. 30.Other data on Thursday indicated consumers are still healthy enough to keep spending and driving growth. The Labor Department said initial unemployment claims fell slightly to 212,000 in the week ended Oct. 19, indicating the labor market remains generally tight. Another government report showed sales of new homes last month stayed close to the strongest pace of the expansion while the Bloomberg Consumer Comfort Index’s buying-climate gauge climbed to a fresh record.Turning UpWhile residential investment may have increased for the first time in six quarters and will help offset continued weakness in business spending, it’s still a small portion of the economy, said Brett Ryan, senior U.S. economist at Deutsche Bank AG.“At the end of the day you have only the consumer propping up the economy right now, and so if the consumer slows even a little bit more than what people expect, it can tip over into recession quickly,” Ryan said.Separately, a preliminary purchasing managers index from IHS Markit showed U.S. factory activity actually improved slightly in October for a second month though remained relatively subdued.Still, factory weakness has been prominent in other recent reports. Manufacturing fell deeper into contraction last month, with a main gauge dropping to the lowest since 2009, while the Fed’s measure of factory output declined by the most in five months. An autoworkers’ strike at General Motors Co. was partly responsible for the decrease in September production.Aircraft OrdersThe broader measure of bookings for all durable goods, or items meant to last at least three years, declined 1.1%, the most since May and also below forecasts in Bloomberg’s survey. The headline durable-goods figure reflects weakness in transportation-equipment bookings, which dropped the most since May. Commercial aircraft orders declined almost 12% even as Boeing Co. said earlier this month it received 25 orders in September, an increase from August.Shipments of non-defense capital goods excluding aircraft -- a measure used in GDP calculations -- fell 0.7%, more than forecast, after no change the prior month. The report showed the three-month annualized gain for business-equipment shipments declined, while it rose for orders, suggesting a potential stabilization for the pace of outgoing goods.“There’s a lot of uncertainty hanging over manufacturing and softness in the global economy,” said Ryan Sweet, head of monetary-policy research at Moody’s Analytics Inc. Even so, “this expansion can go on without a large contribution from manufacturing” given that it’s a relatively small part of the economy, Sweet said.\--With assistance from Kristy Scheuble, Vince Golle and Alex Tanzi.To contact the reporters on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net;Reade Pickert in Washington at epickert@bloomberg.netTo contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince GolleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • The New York City Retail Apocalypse That Wasn’t
    Bloomberg

    The New York City Retail Apocalypse That Wasn’t

    (Bloomberg Opinion) -- Vacant storefronts are the scourge that is eating New York City. At least, that’s been the story for the past couple of years. Bleecker Street in Greenwich Village went from high-end fashion destination to a row of empty shops reminiscent of the Rust Belt.  Manhattan’s Upper East Side has been “facing a retail vacancy epidemic.” Manhattan Borough President Gale Brewer bemoaned 188 vacant storefronts along the length of Broadway, and a New York Times photo essay on vacant storefronts cited a “survey conducted by Douglas Elliman,” a real estate brokerage, that purportedly found about 20% of Manhattan retail space to be vacant, up from 7% in 2016. That statistic has been repeated widely since, even though when Rebecca Baird-Remba of the Commercial Observer followed up, nobody at Douglas Elliman could confirm it.Recently, though, two city agencies have finally come through with real numbers, and the picture they paint isn’t nearly as dire. Retail vacancy rates have risen in the city over the past decade, at least through last fall, but only by a couple of percentage points. New York’s retail vacancy problems may actually be smaller than those facing most of the rest of the country as online shopping keeps gaining market share. And while the City Council has been considering legislation to limit landlords’ ability to raise rents on commercial tenants, asking rents have been falling rapidly in the many of the city’s retail districts.How bad is the vacant storefront problem in New York, and how much worse has it gotten? In a survey of 24 neighborhoods in all five boroughs that was released in August, the Department of City Planning found that the percentage of retail storefronts that were vacant averaged 11.6% in late 2017 and 2018, ranging from 5.1% in Jackson Heights in Queens to 25.9% along Canal Street in Manhattan. In eight neighborhoods that the department had also surveyed in 2008 and 2009, the percentage of vacant storefronts had risen from 7.6% to 9%. Then, in September, City Comptroller Scott Stringer published a report using administrative data from property tax filings to estimate the percentage of retail square footage in the city that was vacant — the way commercial vacancy rates are usually expressed — and found that it had risen from 4% in 2007 to 5.8% in 2017.In raw numbers, the Comptroller’s office found that city had 142 million square feet of retail space in 2007, 5.6 million of them vacant, and 202.8 million square feet in 2017, 11.8 million of them vacant. These numbers do have quirks, such as the fact that some owners of smaller retail properties aren’t required to file the Real Property Income and Expense forms from which the data are derived.(2) But it’s nice to finally have some data, and the story they tell rings true, especially when you break things down by borough.Vacancy rates are down since 2010 in the Bronx, Brooklyn and Queens, which have all been having a pretty good decade, economically speaking. They’re up in Manhattan, which has also been having a good decade but has by far the most retail space and highest rents. Then there’s Staten Island, which is much less urban than the rest of the city and has seen less recent economic and population growth — and now has a retail vacancy rate in the double digits.Staten Island’s retail vacancy line looks a bit like the one for large shopping malls nationwide. Despite a growing economy and strong consumer spending, the national mall vacancy rate was 9.4% in the fourth quarter, as high as it was during the aftermath of the worst recession in 75 years, and almost twice as high as before the recession.“Retail is in a process of evolution,” says Victor Canalog, chief economist at Moody’s Analytics Reis, the source of the national data. “Some are handling it better than others.” Department stores and clothing retailers are struggling, while restaurants, nail salons and other businesses that are less vulnerable to online disintermediation aren’t. New York City happens to be really big on restaurants, nail salons and other you’ve-got-to-be-there storefront businesses.Moody’s Analytics Reis also measures vacancy rates for “neighborhood and community shopping centers,” aka strip malls.(3) For them the national vacancy rate was 10.1% in the third quarter of this year, which is about where it’s been since 2014 when the data series begins. The company doesn’t track New York City retail because so much of the space is in residential and office buildings, but third-quarter vacancy rates were 11.7% in Central New Jersey, 8.9% in Northern New Jersey and 7.4% in Fairfield County, Connecticut. So while the numbers may not be perfectly comparable, New York City’s retail vacancy rate of 5.8% doesn’t seem at all out of line with what’s been going on in the rest of the region and the country. In fact, it seems like it might be on the low side.So why has there been so much gnashing of teeth about the city’s vacant storefronts? Well, we New Yorkers do like to complain. Also, because the city has added so much retail space (like the big new Hudson Yards development), the sheer amount of vacant space is up more sharply than the vacancy rate. And there definitely are some well-known shopping streets with eye-catching numbers of vacant spaces. The most shocking tend to be in what the Department of City Planning refers to as “hot corridors” — established or rapidly changing areas in Manhattan and Brooklyn where rents rose a lot before the vacancy uptick and building owners have resisted price cuts. “Some owners kept spaces vacant while seeking high rents,” according to the department’s report. “In many cases, they had promised certain rent levels and a ‘credit tenant’ to their lenders in order to secure favorable loan terms.” What’s a credit tenant? “Typically large retailers with a national footprint.”This sure seems to be what’s been going on along Canal Street, which was formerly known for its very local and far-from-posh retailers of electronics, hardware, art supplies and counterfeit brand-name goods and is now transitioning into something more conventional. On Bleecker Street it’s a more involved story that apparently started with the 1996 opening of Magnolia Bakery, which, after being featured in an episode of “Sex and the City” in 2000, began attracting crowds from all over the world who wanted the cupcakes that they had seen Carrie and Miranda eat. Retailer Marc Jacobs soon followed in the crowds’ wake, and other fashion brands followed Marc Jacobs. From a New York Times retrospective published in 2017:During its incarnation as a fashion theme park, Bleecker Street hosted no fewer than six Marc Jacobs boutiques on a four-block stretch, including a women’s store, a men’s store and a Little Marc for high-end children’s clothing. Ralph Lauren operated three stores in this leafy, charming area, and Coach had stores at 370 and 372-374 Bleecker. Joining those brands, at various points, were Comptoir des Cotonniers (345 Bleecker Street), Brooks Brothers Black Fleece (351), MM6 by Maison Margiela (363), Juicy Couture (368), Mulberry (387) and Lulu Guinness (394).In the end, though, the theme park failed to attract enough paying visitors. It was a failed retail experiment that was enormously disruptive to the neighborhood and the small businesses that had previously served it, and I totally get why it makes steam come out of some people’s ears.Still, Bleecker Street is now making a low-key comeback, thanks to asking rents that are 40% lower than they were just three years ago. (Oh, and Magnolia Bakery is still there, and now has locations in four other U.S. cities and seven foreign countries.)The Bleecker Street data only start in 2008 because the Real Estate Board of New York, a trade association, didn’t consider it a major retail corridor before then (it still doesn’t consider Canal Street one), which is why I’ve included a nearby stretch of Broadway in Soho to give a sense of what probably happened before 2008. The first 15 years of this century were a time of major retail rent increases in Manhattan, with some of the biggest in neighborhoods that were already quite expensive.One thing that stands out is what has happened to the stretch of Madison Avenue with high-end department store Barneys near its south end and what used to be an unbroken succession of smaller and in many cases even higher-end clothing and accessories retailers to the north. This corridor saw big rent increases in the 2000s, and was the highest-rent retail zone in the city for much of that decade, but since the financial crisis its rents haven’t come even close to keeping up with those in the tourist-clogged shopping districts to its south. The Madison Avenue retail business model was about selling very expensive tangible goods to rich people, in person, and it has been struggling for a while. Barneys filed for bankruptcy in August and the blocks north of it are now pocked with empty storefronts.(1)By contrast, retail space in Times Square and along Fifth Avenue in midtown is used as much for branding and entertainment as for selling goods, and that has held up better. Will it continue to hold up? I don’t think anybody knows — Neiman Marcus and Nordstrom are embarking on grand new ventures in the city this year even as other department stores struggle or leave town. Retail is changing, and the long leases and high transaction costs in commercial real estate markets make adjustment to those changes slow and uneven. But the adjustments do come.I’ve been living near Broadway on Manhattan’s Upper West Side and just north of it for most of the past two decades, and that thoroughfare has been in an ongoing retail transition for the whole time, with lots of boarded-up storefronts to show for it. One cause is the rising neighborhood affluence (aka gentrification) that has led building owners to raise rents higher than long-established merchants could bear. Another has been the desire of “large retailers with a national footprint” to expand into neighborhood shopping districts around the city, which further encouraged building owners in their rent aspirations. The two kinds of retailers that seem to have expanded the most in Manhattan over the past couple of decades are bank branches and drugstores. Their expansive era may have ended, though:If I were a commercial property owner in a neighborhood shopping district in Manhattan, this chart would make me sad. As a regular shopper in such a district, I see it as a sign that the worst may be over.About 15 years ago, a toy store and an adjoining pizzeria or bagel shop or both (family recollections differ) on Broadway near our then-apartment shut down. My wife and I assumed the replacement would be something lame, but our then-five-year-old son hopefully speculated that the new place would be a combination toy and book store. When it turned out to be an HSBC bank branch, he was crushed. And people wonder why Gen Z distrusts capitalism!Times change, though. About four years ago, a less-than-great toy/gift store on Broadway in our current neighborhood shut down. The space reopened in 2017 not as a bank but as Hex & Co., a board-game store and gaming parlor that also serves food and drinks and hosts classes and events. It’s been a huge success, and will be moving soon into a larger space a couple of blocks to the north. One of its owners, a former real estate executive named Mark Miller, recorded an illuminating video a few months ago in which he rails against the idea that landlords jack up rents because they secretly benefit from empty storefronts:[There’s] a myth, a conspiracy theory, an urban legend that somehow our vacant retail space is the result of landlords asking for inflated commercial rents because they somehow have some magic way of turning that into cash or tax breaks on the back end. To me that’s just crazy talk. What benefits you is getting a solid tenant who can pay a sustainable rent.Miller goes on in the video to say that succeeding in storefront retail now requires experimenting with more lines of business than just selling goods that can be acquired online, that landlords are “cautious creatures,” that lining up a retail lease is a complex affair “more like a kidney donation than it is like going to the store to buy a sweater” and that city regulations that weigh heavily on small businesses are a problem.A multivariate regression analysis of the vacancy data conducted as part of the Comptroller’s office study backed up a couple of these assertions, finding statistically significant associations between vacancy rate increases and: Amazon.com Inc. revenue. The length of time it takes to get an alteration permit or liquor license from the city. Rising neighborhood retail rents.The link between rising rents and rising vacancy rates does indicate that even though landlords do not have a magic way of turning vacant retail space into cash, they’re more likely to hold space vacant if they think it will rent for more in the future. Falling rents should eventually shift that equation. REBNY tracks retail rents for Broadway from 72nd Street to 86th Street on the Upper West Side, and they were lower last spring than at any time since 2007. Adjusted for inflation, they haven’t been this low since 2002. Let the retail experimentation begin.(Clarifies the percentage of vacant retail storefronts between 2017 and 2018 in the third paragraph.)(1) Also, starting in 2014, penalties for failing to file the forms sharply increased. So actual square footage is more than the reported numbers, but the gains over the past decade were probably smaller — although still quite substantial in terms of both vacant and total space. The vacancy rates may also be skewed by the reporting quirks, although probably not by as much.(2) Here are the formal definitions from Moody's Analytics Reis: A neighborhood shopping center is"constructed around a supermarket and/or drug store as the only anchor tenant(s)," while a community shopping center is "a retail property offering a wider range of apparel and general merchandise than a neighborhood center."(3) The Barneys bankruptcy was occasioned in part by a doubling of its Madison Avenue rent, which may seem odd in light of recent rent decreases along the street but is actually entirely to be expected given that its previous lease dated to 1999.To contact the author of this story: Justin Fox at justinfox@bloomberg.netTo contact the editor responsible for this story: Sarah Green Carmichael at sgreencarmic@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.