CEO Succession Practices: 2012 Edition

CEO Succession Practices: 2012 Edition

Jason D. Schloetzer Georgetown University – McDonough School of Business

Matteo Tonello  The Conference Board, Inc.

Melissa Aguilar The Conference Board, Inc.

April 13, 2013

The Conference Board Research Report R-1492-12-RR

Abstract: 
CEO Succession Practices: 2012 Edition documents and analyzes succession events of chief executive officers (CEOs) of S&P 500 companies. In addition to updates on historical trends, the study features discussions of the most notable cases of CEO succession that took place in 2011 (based on press announcements and other publicly available information) as well as the results of a survey of corporate secretaries and general counsel on the succession oversight practices of their boards (administered annually by The Conference Board). The study includes the following: Part I-CEO Succession Trends (2000–2011): Year-by-year succession rates; Part II-CEO Succession Practices (2011): Includes two sections, “Board Practices in CEO Succession Planning” and “Communication Practices in CEO Succession”; Part III-Notable Cases of CEO Succession (2011): Summaries of 10 episodes of CEO succession that made headlines in 2011 (Advanced Micro Devices; The AES Corporation; Apple; First Solar; Gannett Co.; Hewlett-Packard; H&R Block; Newell Rubbermaid; PG&E; and Yahoo); Part IV-Shareholder Activism on CEO Succession Planning (2011): Discusses a critical policy reversal by the U.S. Securities and Exchange Commission on the excludability of shareholder proposals in CEO succession policies (Hewlett-Packard; Kohl’s; News Corp; Red Robin Gourmet Burgers; United Natural Foods). Concluding the report is an appendix of The Conference Board Roadmap to CEO Succession Planning, which outlines a series of steps intended to help directors organize succession planning, integrate it with existing board responsibilities, make it transparent to all stakeholders, and ultimately define it as an ongoing element of business strategy.

India’s industrial dreams sputter

India’s industrial dreams sputter

There is an urgent need for manufacturing to expand to boost growth and create jobs. -ST
Krittivas Mukherjee
Sun, May 19, 2013
The Straits Times

NEW DELHI – A US$ 12 billion (S$15 billion) steel factory in eastern India was supposed to be the country’s biggest foreign investment, the symbol of a nation’s rush to become an industrial giant. Seven years on, the site is still a patch of sand with a few beat-up containers.

The steel mill that was to be built by South Korean giant Pos- co has been caught up in a drawn-out battle with villagers for land and for government environmental clearances. Thus it has become a symbol of all that needs to change if India is to become a global manufacturing hub.

India is expanding at its slowest in a decade. If it wants to revive lasting growth and absorb some 10 million Indians set to join the workforce annually over the next decade it must shift its economic engine towards manufacturing, industry and analysts say. Instead, factory output has steadily declined, underlining the challenge India faces in achieving its target of expanding manufacturing’s share of gross domestic product to a quarter by 2022 from about 15 per cent now. Read more of this post

China Development Bank Says $8.1 Trillion Needed for Urban Shift; China must urgently find special financing channels to support the urbanization process because local governments can’t afford the spending

China Development Bank Says $8.1 Trillion Needed for Urban Shift

China needs at least 50 trillion yuan ($8.1 trillion) in new investment by 2020 to accommodate a burgeoning population of city-dwellers, according to the president of China Development Bank.

China must urgently find special financing channels to support the urbanization process because local governments can’t afford the spending, Zheng Zhijie, the bank’s president, wrote in an article in the May 16 issue of China Finance, a journal run by the People’s Bank of China. Zheng didn’t elaborate on the estimate, which is about equal to the nation’s nominal gross domestic product in 2012.

The figure shows the extent to which China will need to come up with funds for roads and benefits as part of Premier Li Keqiang’s efforts to make urbanization a key engine of growth. China Development Bank, the world’s largest policy lender, created the the nation’s system of local financing for infrastructure projects. Read more of this post

Vietnam Says Economy at Great Risk of Macroeconomic Instability

Vietnam Says Economy at Great Risk of Macroeconomic Instability

Vietnam still faces “great risk” of macroeconomic instability, a deputy premier said, as credit growth trails behind targets while banks work to reduce elevated bad debt that has hampered growth. While Vietnam is targeting a 12 percent expansion in credit this year, local businesses are facing difficulties getting loans, Deputy Prime Minister Nguyen Xuan Phuc told the National Assembly in Hanoi today. Credit grew about 2 percent in the first four months of the year, the government said last week. The economy expanded 5.03 percent last year, the slowest pace since 1999, and the International Monetary Fund last month cut this year’s forecast to 5.2 percent from 5.8 percent. Lending grew last year by what the World Bank described as an “anemic” 9 percent, and while the central bank has cut policy rates, its attempts to spur growth have been countered by delays in forming a vehicle to address bad debt.

Read more of this post

‘Love Hormone’ Promises Safer Births After Pfizer Flop

‘Love Hormone’ Promises Safer Births After Pfizer Flop

A hormone treatment based on technology used in Pfizer Inc. (PFE)’s failed inhalable insulin shows promise in fighting the leading cause of maternal mortality.

Six years after Pfizer pulled Exubera from the market at a cost of more than $2.8 billion, scientists at Melbourne’s Monash University are revisiting the inhalable technology to deliver a life-saving medicine to stop post-delivery hemorrhage.

The Bill & Melinda Gates Foundation is backing the effort to produce a better way to give oxytocin, a brain chemical that helps the uterus contract after birth and is sometimes referred to as the “love hormone” because of its role in orgasm and bonding. The project is one of several testing inhalations to deliver medicines, salvaging the know-how of a product that was taken off the market after just 14 months of lackluster sales.

“Exubera was the first generation,” said John Patton, one of the original inventors of Pfizer’s inhaled insulin technology system. “When you’re first, you take a lot of bullets. With the developments in the industry, it’s just a matter of time before we will be inhaling lots of medicine.”

The lead scientist for the Monash project, Michelle McIntosh, says her group plans to start testing a dry-powdered form of oxytocin by early 2014. Patton’s company Dance Biopharm Inc., is working on an inhaled insulin, as is Mannkind Corp. (MNKD), the biotech company founded by billionaire investor Alfred Mann. Read more of this post

“Whiskey is for drinking, and water is for fighting.”: The fight for North Dakota’s fracking-water market

Insight: The fight for North Dakota’s fracking-water market

12:48am EDT

By Ernest Scheyder

WATFORD CITY, North Dakota (Reuters) – In towns across North Dakota, the wellhead of the North American energy boom, the locals have taken to quoting the adage: “Whiskey is for drinking, and water is for fighting.”

It’s not that they lack water, like Texas and California. They are swimming in it, and it is free for the taking. Yet as the state’s Bakken shale fields have grown, so has the fight over who has the right to tap into the multimillion-dollar market to supply water to the energy sector.

North Dakota now accounts for over 10 percent of U.S. energy output, and production could double over the next decade. The state draws water from the Missouri River and aquifers for its hydraulic fracturing, the process also known as fracking and the key that has unlocked America’s abundant shale deposits. The process is water-intensive and requires more than 2 million gallons of water per well, equal to baths for some 40,000 people. Read more of this post

Amid frenzy over map apps, new focus on 16th century world view

Amid frenzy over map apps, new focus on 16th century world view

Sat, May 18 2013

By Deborah Zabarenko

Conservators at the Library of Congress prepare a map for its encasement in Washington

WASHINGTON (Reuters) – As online titans compete to deliver instant maps to smartphones, the Library of Congress in Washington is focusing attention on an antique “cosmology” printed in 1507 that serves as America’s birth certificate.

The black-and-white map created by Martin Waldseemuller, a French cleric, was the first time the name America had appeared on any map.

Waldseemuller was prescient enough to show the Rocky Mountains and the Pacific Ocean at a time when no one else in Europe thought they were there.

The map, purchased a decade ago at a cost of $10 million, is the centerpiece of an exhibit at the Library of Congress running through June 22 that features a collection of artifacts from Waldseemuller and his colleagues. Read more of this post

NEA Notches 3,000 Percent Return on Tableau Software Investment as Digital Chart Valuation hit $950 Million on Nasdaq Debut

NEA Notches 3,000 Percent Return on Tableau Software Investment

For New Enterprise Associates Inc., its investment return on Tableau Software Inc. (DATA) was off the charts.

NEA’s $29.2 million investment in the digital-chart provider, which made its stock-market debut today, was valued at more than $950 million at the close in New York, making the venture-capital firm the top winner so far this year, Bloomberg.com reported on its Tech Deals blog.

As any Silicon Valley pundit knows, the vast majority of venture-capital bets fail. What makes the business work is the very rare gain of more than 3,000 percent on an investment, like the return NEA has thus far achieved on Tableau.

NEA first backed Seattle-based Tableau in 2004, a year after the company was founded, gaining two board seats and providing $5 million to “expand sales operations and invest in product development,” according to a statement at the time. NEA, with offices in Menlo Park, California, and Chevy Chase, Maryland, put in another $10 million in 2008 and $14.2 million in 2010.

More than 10,000 companies including Apple Inc. (AAPL) to Bank of America Corp. have used Tableau’s software to create easy-to-use charts out of complex data. Read more of this post

Bamboo Innovator Workshop for the Singapore Public: In Search of Compounding Stocks in Uncertain Times (Series #1 of 4)

http://valueinvesting-series1.eventbrite.sg/

From the Fund Management Jungles: Value Investing Exposed and Explored (Workshop Series)

In Search of Compounding Stocks in Uncertain Times (Series #1 of 4)

FE Asia Consultancy Pte Ltd

Saturday, 13 July 2013 from 09:00 to 17:00 (SGT)

Singapore, Singapore

Event Details

“In business, I look for economic castles protected by unbreachable ‘moats’.”

– Warren Buffett

With unresolved crises on the horizon, investors are often immobilized in making investment decision. “Wait for the clouds to clear” is the mantra. Value investing appears to provide a way out to see opportunities in cloudy weather by using the “cheap” price signal to identify “out-of-favor” neglected stocks and invest in them for “reversion back to mean”. Hence, pick stocks with “cheap” valuations based on conventional metrics and ratios – how much lower can they go anyway? – and they will bounce back up to their historical average levels. Or simply wait for a market dip, or a crash, before declaring some magical list of top ten stock tips to invest in. This is NOT value investing.

When Li Ning, the “Nike of China”, announced that its founder is going into industrial park and property development in September 2010, the stock has been a darling, having a competitive “moat” with brand recognition and it has recovered strongly since its bottom in March 2009 by climbing 140% to HK$24 per share. Oh, it is already expected that the market will react negatively to the property news, now it is down 20% to HK$19, value stock, be contrarian, BUY! Down another 20% to HK$15, getting cheaper and it’s out-of-favor, it will bounce back up, BUY! And the value investor catches the falling knife until below HK$5 now; while Nike hits an all-time high.

How do value investors distinguish whether “cheap” stocks are value traps or opportunity?Without an understanding of the underlying business model dynamics and analyzing the durability of the economic moat, an investment decision based on price and macro signals and historical valuation metrics can be misleading and costly. Without an understanding of business model, one would also have sold Wal-mart after it was listed in 1972 as the stock crashed over 60% in the next three years. Wal-mart went on to compound 1,200-fold since 1972 to over US$250 billion in market cap – a $100,000 investment in Wal-Mart becomes a $120 million treasure trove. So why is Wal-mart able to bounce back to scale new heights but the same cannot be said for the “Nike of China”?

Can resilient business models – Bamboo Innovators – outperform even in stormy periods? When Shanghai Composite Index crashed 70% from its peak of 6,000 in October 2007 to below 2,000 at the bottom in March 2009, Yunnan Baiyao was UP around 8%. As the index bounce to 2,200, still down 60% from its peak, Baiyao is up over 220% during the same period. Increasingly, such resilient business models are outperforming in Asia and globally; while the “cheap” stocks get cheaper and they become the fertile ground for “insiders” (庄家) who manipulate prices and volumes and inject “action” via exciting corporate news announcement of “sexy” projects or M&As, luring investors in and then offloading to them in a pump-and-dump cycle. Sophisticated value investors can overcome poor and uncertain macro conditions by investing in resilient compounders because they have their own internal rhythm to create value, like the bamboo, which bend, not break even in the wildest of storm that would have snapped the once-mighty oak tree.

Course Highlights:

– Mr Kee, one of the few Asian fund manager being invited to speak at a number of top banking & finance conferences around the world alongside with renowned speakers such as Praveen Kadle, Chief Executive Officer of Tata Capital & Lauren Templeton, President of Lauren Templeton Capital Management

– Learn from an experienced & qualified instructor who has taught in local Universities

Program Outline and Key Learning Points:

  • LEARN the R.E.S.-ilience factors in the business model and economic moat analysis of how Bamboo Innovators create extraordinary value, particularly the “E” factor which stands for “emptiness” in the business model.
  • GAIN the surprising insight of sophisticated institutional investors who understand why growth in sales, profit and tangible asset may not translate to market capitalization growth and sustainable share price gains.
  • ATTAIN the critical knowledge of 12 types of sophisticated institutional investors that climbing from $50 million to $1 billion in market cap takes an entirely different business model dynamics as compared to scaling up sustainably from $1 billion to $20 billion in market cap.
  • RECOGNIZE the 12 types of business models and their profit patterns and acquire the ability to scan through different businesses in various industries to understand the key levers for growth ahead of the investment curve.
  • UNDERSTAND why and how businesses hit a stall point in growth and without a transformation in business model, bigger can be riskier. Thus “Grow or Perish” become “Grow AND Perish”
  • DISSECT a wide range of real-world cases of Asian and global Bamboo Innovators in various industries and understand the intricacies of their business models, their critical success – and failure – factors.
  • UNIFY at the end of the day all the previously disparate loose-hanging concepts, descriptive facts and “checklists” you have learnt from various sources into the practical Bamboo Innovator mental model when it comes to real investment decision-making.

Understand more about the Instructor’s investment approach with the following published articles:

About the Instructor:

Koon Boon is the founder and managing director of the Singapore-based Bamboo Innovator Institute to establish the thought leadership of resilient value creators around the world. KB has been rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets. He was a fund manager and head of research/analyst at a Singapore-based investment management organization dedicated to the craft of value investing in Asia. He had been with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus flagship Asian fund. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. He received his Masters in Finance (magna cum laude) and double degree in Accountancy and Business Management (both summa cum laude) from the Singapore Management University (SMU). He had taught accounting at his alma mater in SMU and lectures at SIM University for working professionals. He had published cutting-edge empirical research in the Special Issue of Istanbul Stock Exchange 25th Year Anniversary of the Boğaziçi Journal, Review of Social and Economic Studies, as well as wrote articles about value investing and corporate governance in the media. He had also presented in top banking and finance conferences in Sydney, Cape Town, HK, Beijing and in the recent Emerging Value Summit 2013. He is also an internationally-featured value investor in Greatinvestors.TV and BeyondProxy.com. He had trained CEOs, entrepreneurs, CFOs, management executives in business strategy, macroeconomic and industry trends in Singapore, HK and China.

The grandson of the Swedish brand’s H&M founder says price is not the only way to judge a company

May 19, 2013 6:00 pm

Karl-Johan Persson, chief executive, Hennes & Mauritz

By Richard Milne in Stockholm

Karl-Johan Persson pauses on his way out of the headquarters of Hennes & Mauritzin central Stockholm. The 38-year-old grandson of the founder has just spent an hour discussing the challenges of running the world’s second-largest fashion retailer – from sourcing clothes from Bangladesh to its rivalry with Spain’s Inditex. But on his way to one of the many H&M stores nearby for a photo shoot, he remembers another big test: modelling. At a fashion show for creative director Margareta van den Bosch’s 70th birthday last year, Mr Persson had to strut his stuff on a catwalk in a leather jacket and white jeans from H&M’s collaboration with Maison Martin Margiela. “This, this was my greatest challenge,” the photogenic Swede says, grinning. Mr Persson’s four years as H&M’s chief executive – following in the footsteps of both his father Stefan and grandfather Erling – have been filled with many tests. His starting point was hardly auspicious, taking the reins of the purveyor of cheap chic in 2009 just as the financial crisis hit consumers with full force. In 2011, H&M was overtaken as the world’s biggest fashion retailer by market capitalisation by Inditex, the owner of Zara. And last month’s factory collapse in Bangladesh, with the loss of more than 1,100 lives, has shone a spotlight on the country’s biggest buyer of clothes: H&M.

The paradox, however, is that even if H&M is focused on “fast fashion” and the shortest-term trends, Mr Persson runs the company with an almost stubbornly long-term approach. Some deride this as leaving H&M looking slow compared with the nimbleness of Inditex as the Swedish group takes its time developing new brands and launching online sales. But Mr Persson still views H&M – the largest listed company in Sweden with a market capitalisation of $58bn and annual sales of $21bn – as a family business with all the planning for future generations that this entails. Read more of this post

The Apathy Epidemic: Why your startup will suck you dry

The Apathy Epidemic: Why your startup will suck you dry

BY PETER SHALLARD 
ON MAY 17, 2013

With entrepreneurs, there’s rarely a lack of drive, at least in the beginning. After a while, though, as your idea matures into an actual startup, apathy can rears its ugly head. Almost every entrepreneur experiences this, though is usually loathe to admit it. It might present itself as a slow decline in motivation, with each day feeling a little less exhilarating than the one before, or a sudden slack of the wind in the sails.

Everyone, no matter how unconventional the business he’s in, is at risk. It happened, for example, to Andy Drish, founder of TheFoundation.com, a-software-as-a-service education platform that preaches a bootstrap philosophy. Last year’s product launch, though wildly successful, left Drish and his team in a slump.

“We were so focused on the launch that we made the mistake of not asking ourselves what the following hundred days of business looked liked,” Drish says. “The launch was so fun — immediately after that, it changed. Our customers felt the results of that too. It felt like depression.” Read more of this post

Is there a link between suicide and weakened social ties? The problem is that as it’s grown easier to be remarkable and unusual, it’s arguably grown harder to be ordinary

May 18, 2013

All the Lonely People

By ROSS DOUTHAT

OVER the last decade, the United States has become a less violent country in every way save one. As Americans commit fewer and fewer crimes against other people’s lives and property, they have become more likely to inflict fatal violence on themselves.

In the 1990s, the suicide rate dipped with the crime rate. But since 2000, it has risen, and jumped particularly sharply among the middle-aged. The suicide rate for Americans 35 to 54 increased nearly 30 percent between 1999 and 2010; for men in their 50s, it rose nearly 50 percent. More Americans now die of suicide than in car accidents, and gun suicides are almost twice as common as gun homicides.

This trend is striking without necessarily being surprising. As the University of Virginia sociologist Brad Wilcox pointed out recently, there’s a strong link between suicide and weakened social ties: people — and especially men — become more likely to kill themselves “when they get disconnected from society’s core institutions (e.g., marriage, religion) or when their economic prospects take a dive (e.g., unemployment).” That’s exactly what we’ve seen happen lately among the middle-aged male population, whose suicide rates have climbed the fastest: a retreat from family obligations, from civic and religious participation, and from full-time paying work. Read more of this post

China’s national problems start in local government; Appeals for financial restraint and prudent investment have failed

May 19, 2013 6:32 pm

China’s national problems start in local government

By George Magnus

Appeals for financial restraint and prudent investment have failed, writes George Magnus

The structural slowdown in China’s economy is starting to cause waves in Beijing, prompting trenchant questions about what the government should do about it. Premier Li Keqiang has recently played down the expectation that there is much the government could or should do, saying that China must rely more on “market mechanisms”. This is, in effect, an acknowledgment of a contradiction in China’s economic model.

Local governments and state enterprises, pillars of that model and its investment-driven growth, have become the agents of both the downswing in growth and increased concerns about financial risk. Fixing this problem, as Mr Li suggested, would be transformational, if the party can do it. Driven by vigorous internal competition and a considerable degree of political autonomy, local governments play a pivotal role in promoting local economic, investment and political interests, and delivering economic growth. Despite strong demands for greater provision of public services, local officials are incentivised by reward and patronage to focus on gross domestic product. Local government spending, however, is having less traction with the economy. Read more of this post

As growth in its core catering business slows, Sodexo (SW) is helping oil rig workers stay fit and convicts get in touch with their inner artist as it seeks a bigger share of life outside the kitchen

Sodexo Tackles Slowdown With Rig Workers and Prison Art

As growth in its core catering business slows, Sodexo (SW) is helping oil rig workers stay fit and convicts get in touch with their inner artist as it seeks a bigger share of life outside the kitchen.

Better known for operating office canteens and cleaning college campuses, the world’s second-biggest caterer is expanding into prison management, office maintenance, and concierge services such as booking hair appointments.

Those initiatives are aimed at making up for slowing growth as the company last month reported a slide in first-half earnings and cut its full-year profit forecast, sending its shares down 10 percent.

“The business is evolving and clients are looking more and more for an end-to-end solution” that encompasses services beyond food, said Lindsay Tocher, chief operating officer of Sodexo’s offshore business unit, which assists energy companies. Read more of this post

Now You Can 3D Print Your Own Invisibility Cloak

Now You Can 3D Print Your Own Invisibility Cloak

Charles Q. ChoiTechNewsDaily | May 18, 2013, 12:00 PM | 2,110 | 1

Invisibility cloaks made of plastic can now be created at home using 3D printers, researchers show.

The first clues that cloaking devices might one day become more than science fiction, a la “Star Trek” began emerging seven or so years ago.

Since then researchers have made such cloaks a reality by smoothly guiding rays of electromagnetic radiation such as microwave beams completely around objects so they proceed along their original trajectory as if nothing were there.

The first working invisibility cloaks were demonstrated using complex lab experiments. They can now, in principle, get made at home using 3D printers. Read more of this post

Demise of Swiss banking secrecy heralds new era

Last updated: May 19, 2013 9:39 pm

Demise of Swiss banking secrecy heralds new era

By James Shotter in Zurich

Over the past five years, Switzerland has fought tooth and claw to keep its 80-year-old tradition of protecting the secrecy of its banks’ clients alive. It is looking like an increasingly forlorn cause. The latest blow came last week, when EU states – under mounting pressure to crack down on tax evasion following a rash of high-profile scandals – finally agreed to open negotiations on a new tax accord with Switzerland. The precise nature of the EU’s demands is not yet clear. It seems likely, however, that the bloc will request that Swiss banks automatically share information about the offshore wealth stashed away in their vaults by EU citizens.

Such a move, says Stéphane Garelli, a professor at the IMD business school in Lausanne, would be the “final nail in the coffin” for the system of secrecy that has helped Swiss lenders suck in SFr2.7tn ($2.8tn) of foreign assets. “Switzerland is now moving towards an orderly retreat,” he says. Read more of this post

Former Korean Prime Minister Nam Duck-woo, who led the nation’s economic development in the 1970s, died of complications from prostate cancer at 89

2013-05-19

Architect of economic development Nam dies

By Kim Rahn

Former Prime Minister Nam Duck-woo, who led the nation’s economic development in the 1970s, died of complications from prostate cancer, Saturday. He was 89

Born in 1924, Nam Obtained a master’s degree in economics at Seoul National University and a doctorate at Oklahoma State University

in 1969 when he was teaching at Sogang University, then President Park Chung-hee picked him as finance minister. Nam maintained the position for five years, leading Korea’s industrial Development called the “miracle of the Han River.”

Between 1974 and 1978, he served as deputy prime minister and minister of economic planning, and as an economic advisor to the Park in 1979.

It is said that the former president selected Nam after reading one of His papers critical of the government’s economic Policies.  Read more of this post

CJ Group, Koreas 20th largest conglomerate, has adopted an emergency strategy as a steep decline in profits of its key affiliates is directly hitting the companys bottom line

2013-05-19 19:15

CJ adopts emergency strategy

By Kim Yoo-chul

CJ Group, Koreas 20th largest conglomerate, has adopted an emergency strategy as a steep decline in profits of its key affiliates is directly hitting the companys bottom line, CJ officials said Sunday. Chairman Lee Jay-hyun is considering closing some of its money-losing businesses while focusing on core and lucrative areas to enhance profitability. The money that will be saved from the cost-cutting efforts will be used to find new cash-cows and to expand its overseas businesses. All of our affiliates went into emergency management mode since early this month. Weve told employees to start work about an hour early, said a group official. Thats part of efforts to boost competitiveness amid market uncertainty. CEOs of the group affiliates agreed to draw up survival plans. The group is tightening its belt. It asked executives to reduce expenditures using corporate credit cards. Only sales personnel are allowed to use cards to treat clients and business partners after regular working hours. Read more of this post

On Hong Kong Shelves, Illicit Dirt on China’s Elite

May 18, 2013

On Hong Kong Shelves, Illicit Dirt on China’s Elite

By CHRIS BUCKLEY

HONG KONG — Visitors from mainland China climb the narrow stairs to a cramped room here filled with forbidden delights: shelves of scandal-packed exposés about their Communist Party masters.

The People’s Recreation Community bookstore and several others on Hong Kong’s teeming shopping streets specialize in selling books and magazines banned by the Chinese government, mostly for their luridly damning accounts of party leaders, past and present. And at a time when many Chinese citizens smolder with distrust of their leaders, business is thriving.

“We come here to buy books that we can’t read in China,” said Huang Tao, a salesman of nutritional supplements from southeast China, who picked out a muckraking volume recently about corruption among senior party leaders. “There are so many things that we’ve been deceived over,” he said, waving toward books on the devastating famine of the late 1950s and early 1960s, an episode that official histories have muffled in euphemisms. “We can’t learn the truth, so black becomes white and white becomes black.” Read more of this post

The most-indebted U.S. companies are rallying more than any time in almost four years compared with the rest of the stock market amid the broadest rally since at least 1995

Leverage Loved in Equities Spurs Broadest U.S. Rally Since 1995

The most-indebted U.S. companies are rallying more than any time in almost four years compared with the rest of the stock market amid the broadest rally since at least 1995.

Federal Reserve interest rates near zero and the expanding economy are allowing Standard & Poor’s 500 Index companies with the lowest working capital, smallest earnings and highest debt ratios to reduce borrowing costs and avoid default. The stocks surged 27 percent this year, almost double the gains for businesses with the most cash and least borrowing, according to data compiled by Bloomberg and Goldman Sachs Group Inc.

Bulls say the spread shows the futility of fighting the Fed at a time when more than 90 percent of the companies in the Russell 1000 Index have risen in 2013, the most in at least 18 years. Bears say loose monetary policy has inflated prices and owners of the riskiest stocks will suffer the biggest losses when the Fed curtails bond purchases.

“The rally is so broad that the weakest companies that hadn’t been participating have finally caught fire and roared ahead,” said Anthony Lawler, a fund manager who helps oversee about $53 billion at GAM Holding AG in London. “A rally can stay broad-based for a period of time. It’s not an indication that it’s toppy.” Read more of this post

Aquino’s New Philippine Senate Majority Boosts Political Mandate

Aquino’s New Philippine Senate Majority Boosts Political Mandate

Philippine President Benigno Aquino won control of the 24-member Senate in mid-term elections, giving him a political boost as he starts the process of choosing his successor.

Candidates backed by Aquino, who’s halfway through his single six-year term, won nine of 12 Senate seats contested in the May 13 vote, according to the official results, meaning his allies now hold 13 seats in the upper house. Aquino’s Liberal Party continued to be the single-biggest bloc in the House of Representatives.

Aquino, who has overseen an economic revival during his three years in office, wants a tighter grip on the Senate to push for stronger anti-graft measures, speedier trials and a more efficient procurement system. The 53-year-old leader is now in a better position to anoint a successor who will continue his reforms, Joseph Abaya, who heads the Liberal Party, said in a mobile-phone message. Read more of this post

Despite curbs, China’s vast hot money triangle flourishes

Despite curbs, China’s vast hot money triangle flourishes

4:59pm EDT

By James Pomfret and Matthew Miller

ZHUHAI, China/HONG KONG (Reuters) – In an underground mall just a stone’s throw from China’s teeming border with Macau, a row of 30 small shops with identical golden plaques does a brisk, though shadowy trade with mainland Chinese visitors, many of them bound for the gambling hub.

“Good rates. Better than the banks,” shout salespeople jostling to usher clients into shops where thick wads of Chinese 100 yuan ($16.31) and HK$1,000 ($130) bank notes change hands and shuffle noisily through electronic cash-counting machines. Licensed as liquor and dry goods stores with stacked shelves of rice wine and cigarettes, many conduct their real business in back rooms – as underground bankers and remittance agents.

“It’s very simple,” said one agent surnamed Choi, dressed in sandals and ripped jeans, as he served tea in a back office where larger transactions are typically carried out. “You give me renminbi here. Then we deliver Hong Kong dollars to you in Macau. We can move tens of millions each day,” he said, glancing up at six security camera images of his shop front flickering on a flat-screen TV. Read more of this post

On fleeting Hong Kong trips, Chinese make frugal fashionable

On fleeting Hong Kong trips, Chinese make frugal fashionable

2013-05-20 01:48:01 GMT2013-05-20 09:48:01(Beijing Time)  SINA.com

Armed with empty suitcases and same-day return tickets, an army of mainland Chinese is descending on suburban outlet shopping malls and international fashion chains in Hong Kong, turning cheap into the new chic as luxury falls out of favor.

Wealthy Chinese used to stop over in Hong Kong for a few days to pick up a Louis Vuitton (LVMH.PA) bag or a wristwatch for up to 40 percent less than in Beijing or Shanghai.

These well-heeled tourists have now been overtaken by bargain-hunters that stay for a few hours, spend more at shops like Inditex SA’s (ITX.MC) Zara and malls such as Citygate Outlets (1972.HK), turning Hong Kong into a must-be location for retailers who are braving some of the world’s most expensive commercial rents. Read more of this post

China Spends $125 Billion Per Year On Riot Gear And ‘Stability Maintenance’

China Spends $125 Billion Per Year On Riot Gear And ‘Stability Maintenance’

Agence France Presse | May 19, 2013, 8:34 AM | 2,595 | 3

Two Chinese paramilitary police test a telescopic sight fitted on a gun model at the China International Exhibition and Symposium on Police Equipment and Anti-Terrorism Technology and Equipment in Beijing on May 15, 2013.

Mannequins in riot gear, armoured cars and drones line a police equipment and “anti-terrorism technology” trade fair in Beijing as vendors seek to profit from China’s huge internal security budget.

The country is estimated to have more than 180,000 protests each year and the ruling Communist Party spends vast sums on ensuring order — more even than on its military, the largest in the world. Read more of this post

Chinese cyber crime: More crooks than patriots

May 19, 2013 3:22 pm

Chinese cyber crime: More crooks than patriots

By Kathrin Hille

The biggest threat is posed by online criminals the state is ill-equipped to police, says Kathrin Hille

On a muggy spring night five years ago in the southern Chinese city of Shenzhen, six young men were slowly getting drunk. “We’d all had a few beers when someone first mentioned Foxconn,” one of them recalls. “But we immediately saw that it was a great idea.” The plan was to hack into the computer systems of the giant Taiwanese contract manufacturer, which assembles many of the world’s best-selling electronic gadgets, such as Apple’s iPhones. This was no drunken whim. Four months later, the six hackers had breached Foxconn’s email system, according to three people with knowledge of the operation. Foxconn’s position at the heart of the global technology value chain made it an alluring target for potential blackmailers. The company’s 1.4m workers assemble products for the cream of the global technology industry including HP, Dell, Cisco, Acer, IBM, Microsoft and Sony. Read more of this post

Why China’s Riches Won’t Bring It Freedom

Why China’s Riches Won’t Bring It Freedom

Modern history is the story of how liberal democracy, originating in the U.K. and America, spread around the world. This may sound like an absurd fantasy. In actuality, this Whiggish narrative of progress underpins most newspaper editorials, political commentary and speeches in the West, and frames larger views of political developments in the non-West.

It accounts for the gloomy undertone to Freedom House’s latest report, which records the shrinking of liberal democracy worldwide. Even countries with regular elections, such as India, are far from upholding the notion of liberalism, which advocates the maximizing of individual rights for the fullest realization of human potential.

Perhaps we should discard the ideological prejudice that assumes the universalization of liberal democracy. We might then be able to see dispassionately the true multiplicity of political forms, how they came into being and what they portend.

The specific socioeconomic conditions that enabled both liberalism and democracy, such as the Reformation’s stress on individual responsibility or industrial capitalism, were particular to Western Europe and America. Read more of this post

Power Grab Trumps Nanotechnology in Putin’s Russia

Power Grab Trumps Nanotechnology in Putin’s Russia

Russian President Vladimir Putin’s changing attitude toward two giant government-led high-tech projects sends a troubling message about his third term in office: Maintaining power is more important than modernizing the economy.

The projects, known as Rusnano and Skolkovo, were meant to propel Russia’s raw-material economy into the technology age. They involved multibillion-dollar government investments, the first in nanotechnology and the second in a new city that would become Russia’s answer to Silicon Valley. They were supposed to provide the infrastructure and stability required to attract large amounts of foreign investment.

Now, both have become targets in Putin’s campaign to demonstrate that he’s being tough on corruption and mismanagement of government funds. As a result, their chances of succeeding are looking increasingly remote. Read more of this post

China Small-Cap Bubble Seen Bursting by Chen After 43% Advance

China Small-Cap Bubble Seen Bursting by Chen After 43% Advance

Chen Li, the UBS AG (UBSN) strategist who predicted the tumble in China’s smallest shares two years ago, says the companies are poised to retreat again after valuations rose to the biggest premium over larger stocks since 2010. The ChiNext index of Shenzhen-listed companies with a median market value of $765 million has climbed 43 percent this year while the CSI 300 Index, which has a median capitalization of $3.5 billion, rose 2.7 percent. The smaller-company gauge trades for 4.6 times net assets versus 1.7 for the CSI index, the widest gap since June 2010, data compiled by Bloomberg show. Small-cap stocks have surged on speculation President Xi Jinping’s plan to boost the consumer, technology and alternative energy industries will benefit companies from Huayi Brothers Media Corp. (300027) to Leshi Internet Information & Technology Co. (300104) The rally may get derailed by tighter monetary policy, which helped spur the last slump, according to Chen.

“The bubble may burst” within two months, Chen said in a May 9 phone interview. The Shanghai-based strategist predicted in January 2011 that small-cap stocks would drop as much as 20 percent. The ChiNext gauge fell 21 percent in nine months. Investors will rotate out of smaller companies and into larger stocks as liquidity tightens, Chen said.

Read more of this post

Japan Biotech Ventures Surge as Abenomics Cash Spurs Speculation

Japan Biotech Ventures Surge as Abenomics Cash Spurs Speculation

Japanese biotech ventures promising to make jet fuel from algae and to produce synthetic cartilage are soaring in Tokyo trading as cash pumped into the economy by the central bank cascades into speculative investments.

Five of the 10 best-performing stocks this year traded on JASDAQ, which has lower minimum profit requirements than Japan’s main bourse, are biotech firms.

The companies have surged as the Bank of Japan last month voted to double debt-buying to more than 7 trillion yen ($68 billion) a month to achieve 2 percent inflation in two years. Prime Minister Shinzo Abe’s proposal this month to provide 110 billion yen in support to stem cell research over the next 10 years is also helping the shares.

“The market expects quantitative and qualitative easing to continue long term, boosting liquidity and drawing investors to speculative shares like biotech,” said Kazuyuki Terao, chief investment officer at Allianz Global Investors Japan, in an interview. “Abe raised health-care reform as a part of his growth plan and that’s also supporting the buy.”

Japan’s regenerative medicine market will probably increase by 62 times to 1.6 trillion yen by 2030 from 26 billion yen in 2012, the economy ministry estimates. Read more of this post

Oil prices are likely to fall over the next few years, the chief executive of Eni, one of Europe’s largest energy companies has said, suggesting a tough time ahead for oil producers

May 19, 2013 7:16 pm

Tough oil pricing ahead, says Eni chief

By Ed Crooks

Paolo Scaroni: ‘Where we can add most value is in countries that are complex and not easy to work in’

Oil prices are likely to fall over the next few years, the chief executive of one of Europe’s largest energy companies has said, suggesting a tough time ahead for oil producers.

Paolo Scaroni, chief executive of Eni, the Italian oil and gas group, said that unless there was another boom in the world economy, sluggish demand and new supply coming on to the market meant the price of crude was “more likely to go down than up” over the next two to five years. However, he suggested his company could survive at much lower prices, and identified Asia as the main target in its plans for future growth.

Mr Scaroni’s expectation of lower oil prices is based on his view that there are two glaring “anomalies” in world energy markets resulting from the US shale revolution, which has caused a surge in gas and oil production. Benchmark US gas at Henry Hub in Louisiana is about $4 per million British thermal units, which compares with about $15 per mBTU for liquefied natural gas imported to Asia, and about $16 per mBTU for the energy content of US crude oil. Over time, Mr Scaroni believes, market forces will narrow both of those gaps. Read more of this post

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