How Wal-Mart Became the World’s Biggest Retailer

How Wal-Mart Became the World’s Biggest Retailer

By Alex Planes
July 2, 2013 | Comments (1)

On this day in economic and business history…

The first Wal-Mart (NYSE: WMT  ) opened its doors in Rogers, Arkansas on July 2, 1962. At this point in his life, Wal-Mart founder Sam Walton had already racked up over two decades of experience as a retailer. He got his start in the industry as a management traineein one of J.C. Penney‘s (NYSE: JCP  ) Iowa stores in 1940. Penney’s focus on maximizing the value of a customer’s visit goes a long way toward explaining Walton’s lifelong obsession with making his own store experiences better through research and observation. Five years later, Walton purchased his first store, a Ben Franklin five-and-dime in Newport, Arkansas with a $20,000 from his father-in-law. Walton took the unprofitable Ben Franklin and turned it into that company’s biggest success in Arkansas, learning along the way that lower prices and proper in-store marketing techniques can make a world of difference in the brutally competitive retail industry. Read more of this post

Do Bigger Desks Make People Dishonest? Putting people in that big corner office might not be a business strategy that helps the rest of us

Do Bigger Desks Make People Dishonest?

Putting people in that big corner office might not be a business strategy that helps the rest of us.

We know that people in large corner offices sometimes do bad things. Could the size of the space actually be one cause?

If you’re skeptical about a link between office size and dishonest behavior (and we were), take a look at a new study from Columbia, MIT, Northwestern, Harvard and Berkeley. Across four experiments, it finds that certain expansive environments make people feel more powerful, and that this sense of power can lead to dishonesty. The researchers aren’t saying all people who get big offices go out and rob banks. But they do show environment is relevant, and that might be worth thinking about (for instance, if you’re moving to a new space).  Read more of this post

Fund management: The rise of smart beta

Fund management: The rise of smart beta

Terrible name, interesting trend

Jul 6th 2013 |From the print edition

INVESTORS face a quandary. Cash offers a return of virtually zero in many developed countries; government-bond yields may have risen in recent weeks but they are still unattractive. Equities have suffered two big bear markets since 2000 and are wobbling again. It is hardly surprising that pension funds, insurers and endowments are searching for new sources of return. Step forward “smart beta”, the latest bit of jargon from the fund-management industry. “Alpha” is the skill required to choose individual assets that will outperform the market; “beta” is the return achieved from exposure to the overall market, for example via an index fund. “Smart beta” is an approach that tries to enhance the return from tracking an asset class by deviating from the traditional “cap-weighted” approach, in which investors simply buy shares or bonds in proportion to their market value. The sector is still small: there is just $142 billion in smart-beta funds, compared with more than $2 trillion stashed in hedge funds. But the concept is catching on. According to State Street Global Advisors, smart-beta funds received inflows of $15 billion in the first quarter of 2013, up by 45% on the same period a year earlier. Read more of this post

Back to the drawing-board: Design companies are applying their skills to the voluntary and public sectors

Back to the drawing-board: Design companies are applying their skills to the voluntary and public sectors

Jul 6th 2013 |From the print edition

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THE office looks like a cross between a Starbucks and a youth club. Bicycles are piled high in racks; there is a ping-pong table in a corner. Young people sit at long pine benches, sipping coffee and poring over laptops, the males looking as if they are taking part in a beard-growing competition. But do not be deceived by the laid-back atmosphere: this is the London branch of one of the world’s most successful design consultancies, IDEO. When it started up in Silicon Valley in 1991 one of its founders, David Kelley, said he did not want to employ more people than could fit in a school bus. Today IDEO has more than 600 employees and offices in eight countries. Read more of this post

Lincoln Mastered Wisdom of Unsent Letter After Gettysburg

Lincoln Mastered Wisdom of Unsent Letter After Gettysburg

Abraham Lincoln, remembered 150 years after a “decisive” battle of the U.S. Civil War, could have excelled in modern-day Washington politics, one of the pre-eminent scholars on the American president says.

“He would be tech savvy, he would lose the beard, he would have some cosmetic surgery, he would make an asset of his height,” historian Harold Holzer said in an interview for Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend. “He was so smart about working with the press, getting the press to work in his behalf, giving out exclusives, and he would have mastered any medium.”

As one measure of Lincoln’s political prowess, Holzer recited an often-told tale of Lincoln thinking twice before dispatching a letter upbraiding his general who defeated the enemy at the Battle of Gettysburg, a turning point for the Northern victory in the Civil War. It was a precursor to the dilemma of hitting the send button on a regrettable email. Read more of this post

How a failed book led to the creation of a new blogging platform

How a failed book led to the creation of a new blogging platform

BY NATHANIEL MOTT 
ON JULY 5, 2013

Claudio Gandelman wanted to write a book. He had been asked to write something about online dating and romance ever since he became the chief executive of Match.com Latin America, and so he reached out to a friend in publishing who might be able to help him get this book published. The only problem was Gandelman’s writing, which would have to be heavily revised by a ghost writer before a book would even become a real possibility. He decided to shelve the project and, like so many other writers whose writing wasn’t quite fit to print, decided to turn to the Web. Read more of this post

Fedspeak: Complex Monetary Policy Spawns Flights of Metaphors; Central Bankers Wax Poetic, Invoking Punch Bowls, Bulls and Scarlett Johansson

Updated July 5, 2013, 6:45 a.m. ET

Fedspeak: Complex Monetary Policy Spawns Flights of Metaphors

Central Bankers Wax Poetic, Invoking Punch Bowls, Bulls and Scarlett Johansson

VICTORIA MCGRANE

At a news conference in mid-June, Federal Reserve Chairman Ben Bernanke struggled to explain what the Fed is trying to do, attempting this metaphor: “We’re going to be shifting the mix of our tools as we try to land the ship in a smooth way onto the aircraft carrier.” He then turned to automobiles, a favorite of central bankers. Trying to distinguish between reducing the Fed’s monthly bond-buying and raising short-term interest rates, he said the former is “akin to letting up a bit on the gas pedal as the car picks up speed” while the latter is “beginning to apply the brakes.” There is a long tradition of explaining complex monetary policy with metaphors. Back in 1955, in a speech littered with analogies to driving, bomb shelters and school exams, then Fed Chairman William McChesney Martin made popular the line that the duty of the Fed was to take away the punch bowl just as the party gets good. Read more of this post

A third of all French restaurants serve dishes prepared largely or entirely elsewhere; Restaurateurs may be forced to draw up new, more honest menus

French restaurateurs may be forced to draw up new, more honest menus

Jul 6th 2013 | PARIS |From the print edition

GIVEN the state of France’s economy, its politicians ought to have bigger worries. But one of the hottest topics in parliament these days is how to force restaurants to reveal whether they make their boeuf bourguignon on the premises or rip open packets and warm up the contents.

On June 27th the lower house approved an amendment to a consumer-rights bill that will force restaurants to label the dishes they prepare from fresh ingredients in their own kitchens as “fait maison”, or “home-made”. This is tougher than the optional label the government proposed, but less stringent than the obligatory description of every dish on every menu as either home-made or based on industrial products, which some want. If the reform goes through, in 2014 the menus of every establishment, from little brasseries in the Dordogne to multi-starred restaurants in Paris, could be sporting truth-in-eating symbols instead of appetising but misleading tags such asfaçon grandmère—“just as grandma used to make it”. Read more of this post

On the 16th anniversary of the devaluation of the baht (July 2, 1997), which preceded the Asian financial crisis, former steel tycoon Sawad Horrungruang talks about the lessons learned

16TH CRISIS ANNIVERSARY

Asian financial crisis and the lessons learned

Nophakhun Limsamarnphun
The Nation July 6, 2013 1:00 am

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Sawad: In hindsight, the biggest lesson was that if you borrowed in foreign currency, there would be multiple risk factors.

Ex-steel tycoon recalls downfall on 16th anniversary of baht devaluation

On the 16th anniversary of the devaluation of the baht (July 2, 1997), which preceded the Asian financial crisis, former steel tycoon Sawad Horrungruang said, “Back then, companies in my area of business [NTS, NSM and affiliated firms] owed as much as US$2.7 billion to foreign and Thai creditors. “The loans were denominated in foreign currencies, so the combined debt doubled overnight as soon as the baht was devalued, and then plunged from Bt25 to the dollar to more than Bt50 [debt jumped from between Bt140 billion and Bt150 billion]. “Back then, interest rates also jumped to more than 10 per cent and if you defaulted, the rate would shoot up to nearly 30 per cent. The massive foreign-exchange losses and high cost of funds meant that it was impossible for any decent business to survive. “In hindsight, the biggest lesson was that if you borrowed in foreign currency, there would be multiple risk factors. In this era of globalisation, whatever happens in the US, Europe or elsewhere is going to effect businesses in Thailand. Read more of this post

Three years ago, Andreas Vgenopoulos, a Greek lawyer-turned-tycoon, was riding high. His investment fund had just snapped up Olympic Air. Today, however, he has become a symbol of Greece’s travails

July 5, 2013, 7:22 p.m. ET

Tycoon’s Rise and Fall: A Modern Greek Drama

By DEBORAH BALL and ALKMAN GRANITSAS

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Andreas Vgenopoulos in 2009 as he discussed plans to save Olympic Air. The carrier has suffered along with the rest of Greece’s economy.

ATHENS—Three years ago, Andreas Vgenopoulos, a Greek lawyer-turned-tycoon, was riding high. His investment fund, which had €15 billion ($19.4 billion) to spend following one of the biggest private-equity fundraisings ever, had just snapped up Olympic Air. Mr. Vgenopoulos was hailed as a national hero for saving Greece’s long-suffering flag carrier—an event he celebrated with a grand soiree in an Athens airport hangar with Cirque du Soleil acrobats performing for the assembled guests. Read more of this post

A cruel, cruel summer for U.S. credit funds

A cruel, cruel summer for U.S. credit funds

7:36pm EDT

By Katya Wachtel and Sam Forgione

NEW YORK (Reuters) – It’s shaping up to be a brutal summer for bond investors as the bloodbath in the U.S. credit market shows no signs of letting up, even as nearly $80 billion has already been wiped from funds. The past six weeks have been humbling for well-known fund managers including Bill Gross of PIMCO, Jeffrey Gundlach of DoubleLine Capital and Ray Dalio of Bridgewater Associates – all victims of a violent sell-off in U.S. Treasuries, mortgage-backed securities or inflation-protected bonds.

On Friday, the yield on the benchmark 10-year Treasury note touched 2.73 percent, gaining more than a full percentage point since early May, as better-than-expected U.S. jobs data fanned speculation that the Federal Reserve could begin to scale back its $85 billion-a-month bond-buying stimulus this fall. Read more of this post

Unique Characteristics in Dental and Veterinary Distributor Markets Support Wide Economic Moats

Unique Characteristics in Dental and Veterinary Distributor Markets Support Wide Economic Moats

By Michael Waterhouse | 07-05-13 | 06:00 AM | Email Article

We have upgraded  Henry Schein (HSIC) and  Patterson Companies (PDCO) to wide-moat companies thanks to their strong competitive advantages in the dental and veterinary distribution markets. As critical intermediaries between a highly fragmented base of customers and suppliers that depend on their scale and customer services, Schein and Patterson possess competitive advantages that support a long time frame of attractive returns on capital, in our view. We also think the high out-of-pocket dental and vet markets will sustain consistent midsingle-digit growth over the long term. Both stocks are trading close to our fair value estimates of $99 and $39 for Schein and Patterson, respectively, and while valuations don’t currently suggest attractive entry points for either firm, we think investors should keep these names on their watch lists. Read more of this post

Plight of the sea turtles: Students coming back home helped build modern China. So why are they now faring so poorly in the labour market?

Plight of the sea turtles: Students coming back home helped build modern China. So why are they now faring so poorly in the labour market?

Jul 6th 2013 | SHANGHAI |From the print edition

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“I LEFT in 1980 with only three dollars in my pocket,” recalls Li Sanqi. He was one of the first allowed to study overseas after the dark days of the Cultural Revolution. Like most in that elite group, he excelled, rising to a coveted position at the University of Texas, while launching several technology firms. Now he is a senior executive at Huawei, a Chinese telecoms giant, enticed back by the chance to help build a world-class multinational.

Mr Li seems the perfect example of a sea turtle, or hai gui (in Mandarin, the phrase “return across the sea” sounds similar to that animal’s name), long applauded in China for bringing back advanced skills. In the past such folk reliably reaped handsome premiums in the local job market, but no longer. Sea turtles are not universally praised, the wage differential is shrinking and some are even unable to find jobs. Wags say they should now be called hai dai, or seaweed. This is a startling turn, given their past contributions. Read more of this post

Home Depot Uses Cloud to Tap ‘Do-It-For-Me’ Market

July 5, 2013, 5:09 PM ET

Home Depot Uses Cloud to Tap ‘Do-It-For-Me’ Market

Rachael King

Home Depot Inc. plans to expand a service that connects shoppers who need help installing purchases like tile or ceiling fans to local contractors. That service relies on communications infrastructure from Twilio Inc. and Amazon.com Inc. “The market is moving from do-it-yourself to do-it-for-me,” Anthony Rodio, vice president of Home Depot, told CIO Journal. About 42% of home improvement projects are now done by outside help, he said. For the first time since 2008, sales to professional contractors is growing faster than sales to consumers, said Frank Blake, Home Depot CEO on a conference call with investors on May 21. Read more of this post

China’s watchdogs show they have teeth in probing infant milk, drugs and Tetra Pak

July 5, 2013 5:55 pm

China’s watchdogs show they have teeth

By Kathrin Hille and Leslie Hook in Beijing and Patti Waldmeir in Shanghai

Tetra Pak became the latest multinational to be targeted by Chinese regulators on Friday, with the launch of an antitrust investigation against the European food packaging group.The announcement followed a probe into the pricing practices of 60 drugmakers by the National Development and Reform Commission, China’s main economic planning agency, and another pricing investigation against baby formula makers. The unveiling of three probes involving foreign companies within the space of one week has led to concerns that multinationals are being targeted by the Chinese authorities – and that their high hopes of the vast Chinese market could be disappointed. Read more of this post

Why Israel should reconsider too much high-fiving over Waze

Why Israel should reconsider too much high-fiving over Waze

BY SARAH LACY 
ON JULY 5, 2013

Earlier this week our wonderful contributor from Israel, Mick Weinstein, wrote a story about a new fund launching and he lead with this: While the Israeli startup community basks in the glow of Waze’s recent $1.1 billion sale to Google, most of the discussion has focused on how Waze validates Israel’s effort to create hugely valuable, globally scaled consumer internet services — a relatively new field for an ecosystem that previously excelled in semiconductors and enterprise software.

I have no doubt that’s what people are saying but….um…what? The only thing “new” about the Israeli consumer Web scene is that it finally had a globally recognized hit. There’s been nearly a decade and thousands of attempts in the country beyond Waze that have mostly missed the mark or been acquired for less than $50 million by the West. One $1 billion hit in a decade of attempts doesn’t prove a country as a whole can do consumer. That’s the case even if it’s a monster hit; a stand alone company that redefines an industry. It’s certainly not the case when it’s a still-early, product-oriented company that many people feel was wildly over valued at just over $1 billion. Read more of this post

Chinese Web giant Tencent faces obstacles in its goal to expand in global IM market

Chinese Web giant Tencent faces obstacles in its goal to expand in global IM market

By Jia Lynn Yang, Saturday, July 6, 7:52 AM

BEIJING — With Web giants such as Facebook and Twitter blocked by the government here, an entire ecosystem of home-grown companies has flourished with names that are unfamiliar to many outside China. Tencent, one of the country’s biggest tech firms, is hoping to change that with a product that is already one of the fastest-growing mobile services in the world. The company’s instant messaging product, WeChat, has amassed more than 300 million users — nearly equivalent to the U.S. population — in less than three years. Tencent says there are more than 70 million users across southeast Asia, India and Mexico, with 30 million of those added in just the past three months. WeChat has also expanded into Saudi Arabia recently, and there are plans to open an office in the United States. But WeChat’s Chinese origins could cause problems for the company worldwide, just as Chinese telecommunications companies Huawei and ZTE have faced obstacles in the United States. Read more of this post

Japan’s DoCoMo holds out to iPhone mania, but at what cost?

Japan’s DoCoMo holds out to iPhone mania, but at what cost?

2:49am EDT

By Sophie Knight and Maki Shiraki

TOKYO (Reuters) – NTT DoCoMo Inc, Japan’s largest mobile provider and a pioneer of the mobile Internet, is one of just a few holdouts among the world’s big mobile carriers not offering Apple Inc’s iPhone to its 60 million customers. It is paying heavily for that obstinacy – with a net 3.2 million users jumping ship to its two domestic rivals over the last 4-1/2 years – but is determined to protect the walled garden of services it has built around its own smartphones. “We’re trying to develop a lifestyle system,” NTT DoCoMo CEO Kaoru Kato told Reuters in an interview this week. While customers and even some executives increasingly clamor for it to relent and sign an iPhone deal, DoCoMo is showing no signs of softening towards Apple. “The biggest problem is the impact on the services that we offer,” Kato said. DoCoMo’s broad offering of exclusive features, however, is no longer attracting what has become the iPhone generation. It is expected eventually to either reach a deal with Apple or risk losing its crown at the top of its industry. Read more of this post

UK tech darlings shun London for New York; “There are very few exit opportunities in Europe.”

July 5, 2013 2:28 pm

UK tech darlings shun London for New York

By Henry Mance and Arash Massoudi

When six entrepreneurs tried to raise money for an online games business in London a decade ago, many investors simply put the phone down. Now it’s the entrepreneurs’ turn to hang up. Their company, known as King and the owner of Candy Crush Saga, the most popular game on Facebook, is planning an initial public offering in New York, according to people familiar with the situation. It heads a list of successful UK tech companies which are turning their backs on a London flotation, and instead crossing the Atlantic in search of a billion-dollar valuation. Bernard Liautaud, a partner at Balderton Capital, which has invested in companies including Wonga, says: “There are very few exit opportunities in Europe.” Read more of this post

Taiwan’s information-technology industry: After the personal computer; Companies built on PCs are adapting to a changed world

Taiwan’s information-technology industry: After the personal computer; Companies built on PCs are adapting to a changed world

Jul 6th 2013 | TAIPEI |From the print edition

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THE first iPhone went on sale on June 29th 2007. Tom Sun recalls the date easily, because TPK, of which he is the chief executive, began manufacturing exactly four weeks before, making touchscreens for Apple’s gadget. This year, Mr Sun estimates, 1.2 billion mobile phones will be made with touchscreens. The iPad has since “created a segment”, the tablet, that he says is “100% touch”. TPK’s booth at Computex, a trade fair in Taipei last month, proudly showed off the latest notebook and all-in-one personal computers (PCs). But Mr Sun enthuses about many more applications, from cameras to cars. Other manufacturers, he says, will follow Tesla, an electric-vehicle maker that has put 17-inch screens in its Model S.

Taiwan, once a maker of soft toys and umbrellas, has long been a high-tech hive. It provides a rare example of successful industrial policy (though much more so in hardware than software). In 1973 the state created the Industrial Technology Research Institute (ITRI) to nurture the tech industry. ITRI started with semiconductors, securing the transfer of old technology from RCA, an American company, in 1976. In 1983 ITRI developed a clone of the IBM PC. Seven years later it formed an alliance of notebook-PC companies. Information and communications technology now makes up one-third of GDP. Read more of this post

Steel: An inferno of unprofitability; The world’s overcapacity in steelmaking is getting worse, and profits are evaporating

Steel: An inferno of unprofitability; The world’s overcapacity in steelmaking is getting worse, and profits are evaporating

Jul 6th 2013 |From the print edition

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THE importance of steel is in no doubt. It is the material from which much of the modern world is made, from skyscrapers to washing machines. Governments everywhere regard a strong steelmaking business as a sign of economic virility, and thus hover anxiously over their domestic producers. A French minister recently threatened to nationalise ArcelorMittal’s Florange plant if it pursued plans to cut jobs and close two blast furnaces. Despite a weak world economy, global production of steel rose by 1.2% last year to a record 1.55 billion tonnes. Read more of this post

Many wonder about Yingluck’s ‘ice-cream gang’ and its power, a so-called gang of four who allegedly influenced Thailand’s prime minister’s decisions.

Many wonder about Yingluck’s ‘ice-cream gang’ and its power

He alleged that former PM Thaksin Shinawatra was unable to control Samak because of this gang. -The Nation/ANN
Sat, Jul 06, 2013
The Nation/Asia News Network

BANGKOK – Labour Minister Chalerm Yoobamrung dropped a bombshell on Thursday when he declared that Prime Minister Yingluck Shinawatra’s “ice-cream gang” would end up dragging her down a ravine. This declaration gave rise to one simple question: Who is in this ice-cream gang and what influence do they have on her decisions? This is not the first time that Chalerm has spoken about an influential gang. During the tenure of the late ex-PM Samak Sundarvej, he talked about a so-called gang of four who allegedly influenced the prime minister’s decisions. The members of this gang were Newin Chidchob, former leader of the Northeast faction in the then-ruling People Power Party; then-deputy PM and finance minister Surapong Suebwonglee; then-deputy PM Sahas Banthitkul; and then-PM’s secretary-general Thirapol Noplampha. He alleged that former PM Thaksin Shinawatra was unable to control Samak because of this gang. During Abhisit Vejjajiva’s tenure, a so-called ice-cream gang 1 was allegedly present. Its members reportedly included then-PM’s Office minister Satit Wongnongtoey; former Democrat spokesman Thepthai Senpong; Democrat MP Sirichok Sopha; then-PM’s secretary-general Korbsak Sabhavasu; then-deputy PM’s secretary-general Issara Sunthornvut; and then-finance minister Korn Chatikavanij. Read more of this post

Singapore property market: In 2006, 15 groups of people would view a condominium unit for rent. Now it’s 15 landlords looking for that one elusive tenant. And those who are less stubborn will even slash prices to secure a tenant

Property market: Dark clouds ahead?

Thursday, Jul 04, 2013

Linette Heng

The New Paper

SINGAPORE – Stick a hand out anywhere in Singapore and you’re likely to touch a millionaire. A paper millionaire, at least. The Republic has the highest concentration of millionaires in the world. Try 17 per cent of all households here, according to a 2012 report by The Boston Consulting Group. But so much of it is tied down to property. Spoils from property account for 58 per cent of their overall wealth, according to a 2013 Barclays report. Things have been good after the global financial crisis in 2008 with money pouring in. But market watchers say things are set to change with forecasts of higher interest rates and more units coming into the market. More than 30,000 units, including HDB flats, will be completed by the end of the year. And those relying on rents to pay off their investment properties may have no idea the water is slowly coming to a boil. Real estate agents The New Paper contacted have seen the signs. In 2006, property agent Harold Teo would regularly have about 15 groups of people viewing a condominium unit for rent. Now the game has changed. He said: “Now it’s 15 landlords looking for that one elusive tenant. And those who are less stubborn will even slash prices to secure a tenant.” They are even willing to reduce rent by up to $500, said Mr Teo, for an apartment originally demanding $4,000 a month. What has changed? Mr Teo calls it the perfect storm – fewer foreigners, less money and more units. Read more of this post

Making money from private equity in China has become as challenging as “trying to catch a fish in a tree“*.

Private Equity in China 2013: the Opportunity & The Crisis — China First Capital Research Report

2013-07-04 15:36:29

Peter Fuhrman, Chairman and CEO China First Capital

Making money from private equity in China has become as challenging as “trying to catch a fish in a tree*. The IPO exit channel is basically shut. Fundraising has never been harder. One hundred billion dollars in capital is locked up inside unexited deals. LPs are getting very anxious. Private companies are suffocating from a lack of new equity financing. PE firms are splintering as partners depart the many struggling firms. Read more of this post

Could poor planning turn China’s city centers into slums?

Could poor planning turn China’s city centers into slums?

Thursday, July 4, 2013

Series: Unstable foundations (Part 3)

China has built glittering metropolises in the span of roughly three decades of reform and opening. But in an equal span of time, shiny urban centers risk losing their shining façades or even descending into slums thanks to poor construction quality and unclear property rights.

One study released in January points to exactly that scenario. Authored by an international team of scholars, the report shows that ambiguity in the country’s land laws is pushing investment out of the center of the city and toward the outskirts.  Read more of this post

Investors have fled bonds of all kinds since mid-June—and even one of the fixed-income market’s safest corners – short-term investment-grade bond funds – hasn’t been immune.

July 5, 2013, 6:09 p.m. ET

‘Safer’ Short-Term Bond Funds See Outflows

DAISY MAXEY

Investors have fled bonds of all kinds since mid-June—and even one of the fixed-income market’s safest corners hasn’t been immune. According to preliminary data from mutual-fund tracker Lipper, in the week ended June 26 investors pulled a net $126 million out of the short-term investment-grade bond funds that have reported so far. That brings those funds’ assets to $77 billion. Unless that number changes, the week would be the first time the category saw more money leave than come in since November 2011. Until the end of May, short-term investment-grade bond funds were the bond market’s defensive darlings. This year through May, according to Lipper, investors poured $12.7 billion into the funds, which buy bonds with a relatively low risk of default that mature within one to three years. Because they mature soon, short-term bonds are less vulnerable to interest-rate increases, which drive down bond prices. For that reason, many investors had moved assets from intermediate- and long-duration funds to short-duration funds. But when Federal Reserve officials signaled in mid-June that the central bank might taper its bond buying later this year, investors pulled billions of dollars out of bond funds—and even short-term bond funds were hit. Read more of this post

Banks’ Capital Estimates Seen Overstated; Regulators’ Report Is Liable to Support Push Toward Tighter Rules for Lenders

July 5, 2013, 12:50 p.m. ET

Banks’ Capital Estimates Seen Overstated

Regulators’ Report Is Liable to Support Push Toward Tighter Rules for Lenders

GEOFFREY T. SMITH

The discretion banks use in judging the riskiness of their long-term assets can overstate their capital ratios by up to 20%, global regulators said in a final report on the subject Friday. The long-awaited report, by the Basel Committee on Banking Supervision, appeared to confirm what many outside the banking industry had long suspected: that banks have a structural bias to understate the risk embedded in the vast majority of their investments, so as to make them look better-capitalized and protected against possible shocks than they actually are. Read more of this post

Real Returns: Are Private-Equity Gains Built to Last?

July 5, 2013, 6:05 p.m. ET

Real Returns: Are Private-Equity Gains Built to Last?

MARK HULBERT

A new study shows that one of the chief benefits of private-equity firms is largely an illusion. The study comes as Dell DELL -2.10% shareholders prepare for a July 18 vote on whether to accept a bid from founder Michael Dell and private-equity firm Silver Lake Partners to take the company private at $13.65 a share.

To be sure, many private-equity buyout funds have in the past produced superior returns. But their fees are steep—typically 2% of assets plus 20% of any profits. And many of their advantages are either ephemeral or can be replicated at a much lower cost. Read more of this post

China: Private Banks Possible in Sweeping Reform

China: Private Banks Possible in Sweeping Reform

Friday, 05 Jul 2013 07:32 AM

China on Friday promised sweeping changes to its state-run banking industry — including allowing the creation of private lenders — to support its credit-starved entrepreneurs and curb what regulators worry are growing financial risks.

Analysts including the World Bank say an overhaul of a Chinese banking system that lends little to private businesses is urgently needed to keep economic growth strong. Communist leaders who took power last year have promised to support entrepreneurs who generate China’s new jobs and wealth, but have yet to make significant changes. Read more of this post

Mortgage REITs Slide Most Since 2011 on Fed Tapering Concern

Mortgage REITs Slide Most Since 2011 on Fed Tapering Concern

Real estate investment trusts that buy mortgage debt slumped after a better-than-forecast employment report stoked speculation the Federal Reserve will begin to reduce the size of its asset purchases.

A Bloomberg index of shares in the REITs tumbled 3.9 percent as of 4:40 p.m. in New York, the largest drop since October 2011. Annaly Capital Management Inc. (NLY), the largest of the companies, and American Capital Agency Corp. (AGNC), the second biggest, each plunged more than 5 percent. Read more of this post

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