Berkshire CEOs Spend Quietly, Match Buffett on Heinz Deal; “Warren’s not a manager,” Iscar’s Wertheimer said. “He’s a teacher for all of us.”

Berkshire CEOs Spend Quietly, Match Buffett on Heinz Deal

Warren Buffett stole headlines when he committed $12.1 billion in a deal to take ketchup maker HJ Heinz Co. (HNZ) private this year. Managers at his Berkshire Hathaway Inc. (BRK/A) spent as much in 2012 while attracting less attention.

Executives who gathered last week for Berkshire’s annual meeting in Omaha, Nebraska, said in interviews that they plan to spend even more this year as they upgrade a rail network and energy utilities, expand manufacturing capacity and hunt for additional acquisitions.

Buffett, 82, relies on chief executive officers of the operating units to make deals and invest in plant and equipment to build the businesses and widen their competitive advantage. That helps slow the accumulation of cash and reduces the need for Buffett, Berkshire’s chairman and CEO, to find other uses for the money.

“If I don’t take my own cash flow and reinvest, all I do is add to his problems,” said James Hambrick, CEO of chemical maker Lubrizol, which Berkshire bought in 2011.

Hambrick’s unit plans to spend about $1.4 billion over the next three years as it replaces equipment and adds capacity to manufacture products like chlorinated polyvinyl chloride, a plastic that’s used for pipes in buildings. Even after similar spending and acquisitions in recent years, Lubrizol has still sent money to Omaha for Buffett to allocate, Hambrick said. Read more of this post

Bernanke Warns of ‘Important Risks’ in Wholesale Funding Markets

Bernanke Warns of ‘Important Risks’ in Wholesale Funding Markets

Federal Reserve Chairman Ben S. Bernanke said risks persist in wholesale funding markets used frequently by Wall Street brokers to finance securities trading.

“Important risks remain in the short-term wholesale funding markets,” Bernanke said today in the text of a speech at a Chicago Fed banking conference. “One of the key risks is how the system would respond to the failure of a broker-dealer or other major borrower.”

Bernanke outlined how the Fed has overhauled risk monitoring since a collapse in mortgage finance triggered a crisis in 2008 that led to the worst recession since the Great Depression.

“More work is needed to better prepare investors and other market participants to deal with the potential consequences of a default by a large participant in the repo market,” Bernanke said. He said that the “possibility of a run” on money-market funds remains. Read more of this post

Correlation between S&P 500 and Initial Jobless Claims

The Most Beautiful Correlation In The Market Continues To Work Perfectly

Joe Weisenthal | May 10, 2013, 4:52 AM | 6,664 | 18

We’ve been posting this chart for ages, and been marveling forever at how beautiful it is, and it just never ceases to amaze us. The relationship between initial jobless claims (red line) and the S&P 500 (blue line) has held remarkably strong for years now. Initial jobless claims hit a brand new post-crisis low yesterday, and of course, the S&P 500 is making brand new highs. Showing this chart is the perfect counterpoint to anyone saying that this is all a “Fed-driven” market and that there’s no real-economy improvement to back it up.

Swiss Watches Unworn as China Tackles Graft: Chart of the Day

Swiss Watches Unworn as China Tackles Graft: Chart of the Day

China’s love affair with glitzy Swiss timepieces is ending, as President Xi Jinping’s campaign against corruption makes targets of wearers.

The CHART OF THE DAY shows Chinese imports of Swiss-made watches tumbled 24 percent in the first quarter from a year earlier for a third straight decline, while shipments to Hong Kong sank 9.3 percent, according to trade data from Switzerland. The lower panel compares shares of Hengdeli Holdings Ltd. (3389) and Emperor Watch & Jewellery Ltd. (887), the biggest watch retailers traded in Hong Kong, versus the Hang Seng Index, Swatch Group AG and Cie. Financiere Richemont SA, the owner of the Cartier brand. Read more of this post

Vietnam’s Star Is Dimming; the strategy that got Vietnam this far — a China-like heavy reliance on state-owned enterprises and top-down planning — is now holding the nation back

Vietnam’s Star Is Dimming

Like other would-be tiger economies, Vietnam faces a trifecta of new threats: a crisis-paralyzed Europe, a faltering America, and a newly spendthrift Japan. Yet the biggest risk to the nation’s future may be old-fashioned nostalgia.

It has been 27 years since Hanoi launched the “Doi Moi” reforms that allowed privately owned companies to participate in the economy and opened key sectors, such as agriculture. The rapid growth that followed propelled Vietnam toward the realm of middle-income nations, transforming the onetime war zone into a case study for development and poverty reduction. Now, though, Vietnam’s 1986 blueprint for a “socialist-oriented market economy” is looking dated.

Recent data show the strategy that got Vietnam this far — a China-like heavy reliance on state-owned enterprises and top-down planning — is now holding the nation back. Vietnam is losing ground on global competitiveness league tables while growth has slowed to about 5 percent, the lowest rate since 1999. To recover, the country needs to do precisely what it has avoided doing thus far: build a truly vibrant and innovative private sector that can diversify growth and create prosperity. Read more of this post

The London market only needs transparent and ethical companies; A continuing flow of bad news from former FTSE favourites, ENRC and Bumi, is raising significant questions about London’s future as stockmarket to the world’s leading growth companies

The London market only needs transparent and ethical companies

A continuing flow of bad news from former FTSE favourites, ENRC and Bumi, is raising significant questions about London’s future as stockmarket to the world’s leading growth companies.

In the eyes of some, recent developments at ENRC and Bumi are symptomatic of the LSE being too aggressive in its efforts to attract foreign companies Photo: AFP

By Dr Roger Barker

5:05PM BST 09 May 2013

The London Stock Exchange’s ambitious vision has been to attract dynamic enterprises from emerging economies onto the London market, where they can benefit from the UK’s respected corporate governance regime. This combination of growth and good governance should, in theory, represent a compelling proposition for investors.

But in the eyes of some, recent developments at ENRC and Bumi are symptomatic of the LSE being too aggressive in its efforts to attract foreign companies. Perhaps inevitably, there has been a call for tighter regulation. In contrast to most UK-listed firms, emerging market enterprises typically have large controlling shareholders rather than dispersed ownership. Such shareholders can potentially use their voting power to overrule the board of directors and disadvantage minority shareholders, particularly through related party transactions which may favour their wider business interests. This type of conflict has been at the heart of recent boardroom disputes at ENRC and Bumi. Read more of this post

Too Much Trust in Local Finances: It would seem Chinese local governments didn’t get the memo about reining in credit risks

May 9, 2013, 5:57 PM

Too Much Trust in Local Finances

It would seem Chinese local governments didn’t get the memo about reining in credit risks.

According to data issued Wednesday by the China Trustee Association, a government-backed industry body, trust companies funneled 461 billion yuan ($75.2 billion) worth of new funding to infrastructure projects in the first three months of 2013 (here in Chinese http://www.xtxh.net/sjtj/15547.html)–-more than in the preceding six months combined.

In the third and four quarters of 2012, trusts — a type of wealth management company common in China – provided a total of 458.3 billion yuan worth of new infrastructure financing.

The massive expansion in lending to infrastructure projects – most of which likely went to investment platforms backed by local governments – comes as Beijing grows increasingly uneasy about the level of local government debt. Read more of this post

China’s Fiddled Figures: It’s hard to reform an economy you don’t fully understand

May 9, 2013, 12:49 p.m. ET

China’s Fiddled Figures

It’s hard to reform an economy you don’t fully understand.

Trade data released Wednesday painted a rosy picture of the Chinese economy. But the closer everyone looks, the more doubts emerge.

Officially, exports picked up enough to create a trade surplus worth $18.2 billion, compared to a deficit of $900 billion in March. Total exports supposedly increased 14.7% compared to April 2012, up from the 10% year-on-year growth notched in March. This sparked hopes in some quarters that disappointing GDP growth in the first three months of the year was a blip.

Yet China’s export data don’t match what other countries report they import from China. That’s because Chinese exporters overstate the value of goods to conceal the repatriation of earnings stockpiled overseas. Firms are circumventing capital controls to speculate on the rising yuan, and also to seek higher returns on risky wealth management products offered by banks at home. This inflow shows up as artificially inflated exports. Read more of this post

$58Bln Hot Money Channeled into Mainland From Hong Kong Disguised as Trade Payments

Analysis: $58Bln Hot Money Channeled into Mainland From Hong Kong Disguised as Trade Payments

05-10 13:18 Caijing

Details of April trade report and anecdotal evidence have prompted many to believe that China’s trade data was significantly inflated by companies fiddling their invoices to bring funds onshore to chase yield.

Alleged distortions on China’s export data may have dented hopes for markets starved for upbeat Chinese data, with analysis showing speculative capital inflows disguised as trade payments could hit 58 billion U.S. dollars. Details of April trade report and anecdotal evidence have prompted many to believe that China’s trade data was significantly inflated by companies fiddling their invoices to bring funds onshore to chase yield. Official data showed Wednesday that April exports grew by 14.7 percent from a year earlier, beating a market consensus of 9.2 percent gain and March’s 10.0 percent increase. Exports to Taiwan rose 49.2 percent to $4.26 billion in April, the customs said, while Taiwan data indicates imports from the Chinese mainland fell 2.7 percent year-on-year to $3.57 billion.

Read more of this post

China Should Ditch Shanzhai or the culture of knock-offs

China Should Ditch Shanzhai  

Economic Observer Online – In-depth and Independent

By EO’s Editorial Board
Issue 618, May 6, 2013
After a five-year court battle, Adidas has finally settled with Adivon (阿迪王), a Chinese sportswear company with a name and logo that is very similar to that of the global brand. Adivon has agreed to transfer its Chinese trademarks and triangular logo to the German multinational and has agreed to never use them again.

Meanwhile, another unfinished lawsuit has aroused even more attention. This one is between Qiaodan Sports Company Limited (乔丹体育) and former NBA basketball player Michael Jordan. The pronunciation of the two names in Chinese is the same. The Chinese sportswear company maintains that is has not infringed upon the Air Jordan trademark and isactually now suing Jordan for suing them two years ago just as Qiaodan was set to debut on the stock market. Qiaodan Sports argues that the Chinese name Qiaodan (乔丹) is only a translation of the common surname “Jordan.” The company also argues that the brand actually chose the name because it means “plants in the south” (南方之草木) in Chinese. As one online commentator put it, Qiaodan’s attempts to justify their use of the brand was “ridiculous” (神解释) or to put it another way, the company was “speaking blindly with eyes wide open” (睁着眼说瞎话). This kind of explanation shows both a lack of respect for the facts and is also an insult to the intelligence of consumers. For most people familiar with sport, the Chinese word “qiaodan” is clearly linked to Michael Jordan. That a Chinese company can be so bold as to claim that there is not relation is connected to the fact that up until now, Chinese culture has given too much leeway to a culture of knock-offs or shanzhai (山寨) as it’s referred to in Chinese. Read more of this post

China’s bond market regulator closed off a loophole that allowed banks that sell high-yielding wealth management products (WMPs) to evade regulatory requirements by moving money between the WMP accounts they manage and their own prop accounts

China issues new rules targeting wealth management fund pools: sources

2:30am EDT

By Yong Xu and Pete Sweeney

SHANGHAI (Reuters) – China’s bond market regulator closed off a loophole on Friday that allowed banks that sell high-yielding wealth management products (WMPs) to evade regulatory requirements by moving money between the WMP accounts they manage and their own proprietary accounts, bond traders at four Chinese banks told Reuters. The four traders, who spoke on condition of anonymity because they are not authorized to speak to media, told Reuters the China Government Securities Depository Trust & Clearing Co Ltd (CDC) and the Shanghai Clearing House had jointly notified commercial banks they could no longer trade bonds between their own proprietary accounts and the WMPs they manage for clients. The rules will go into effect Friday afternoon, the sources said. “Yesterday we could do it, today everybody has to undo it; it’s new regulation after new regulation,” said one of the traders. Read more of this post