Peter Buffett: The Charitable-Industrial Complex; As more lives are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.”

July 26, 2013

The Charitable-Industrial Complex



I HAD spent much of my life writing music for commercials, film and television and knew little about the world of philanthropy as practiced by the very wealthy until what I call the big bang happened in 2006. That year, my father, Warren Buffett, made good on his commitment to give nearly all of his accumulated wealth back to society. In addition to making several large donations, he added generously to the three foundations that my parents had created years earlier, one for each of their children to run.

Early on in our philanthropic journey, my wife and I became aware of something I started to call Philanthropic Colonialism. I noticed that a donor had the urge to “save the day” in some fashion. People (including me) who had very little knowledge of a particular place would think that they could solve a local problem. Whether it involved farming methods, education practices, job training or business development, over and over I would hear people discuss transplanting what worked in one setting directly into another with little regard for culture, geography or societal norms. Read more of this post

For millions of readers around the world, a wildly successful free Bible app, YouVersion, is changing how, where and when they read the Bible

July 26, 2013

In the Beginning Was the Word; Now the Word Is on an App


EDMOND, Okla. — More than 500 years after Gutenberg, the Bible is having its i-moment. For millions of readers around the world, a wildly successful free Bible app, YouVersion, is changing how, where and when they read the Bible. Built by, one of the nation’s largest and most technologically advanced evangelical churches, YouVersion is part of what the church calls its “digital missions.” They include a platform for online church services and prepackaged worship videos that the church distributes free. A digital tithing system and an interactive children’s Bible are in the works. Read more of this post

Embracing the Dark Side: In our haste to embrace a 24/7 lifestyle, nocturnal hours once reserved for sociability, reflection and rest have been usurped

July 26, 2013, 5:19 p.m. ET

Embracing the Dark Side

In our haste to embrace a 24/7 lifestyle, nocturnal hours once reserved for sociability, reflection and rest have been usurped.



For more than 300 years, nocturnal darkness—Shakespeare’s “vast sin-concealing chaos”—has fought a rear-guard battle to fend off the forces of light. By the early 18th century, most European metropolises, from London to Vienna, had installed streetlights in response to mounting fears over crime. “The reign of the night is finally going to end,” a Parisian pamphleteer exulted in 1746. With the arrival of the Industrial Revolution, accompanied by gas and then electric lighting, evening was open for pleasure as well as for business. Artificial illumination, by pushing back ages of primordial darkness, became the mightiest symbol of modern progress. Read more of this post

A Mysterious Hum Is Driving People Around The World Crazy

A Mysterious Hum Is Driving People Around The World Crazy


It creeps in slowly in the dark of night, and once inside, it almost never goes away. It’s known as the Hum, a steady, droning sound that’s heard in places as disparate as Taos, N.M.; Bristol, England; and Largs, Scotland. But what causes the Hum, and why it only affects a small percentage of the population in certain areas, remain a mystery, despite a number of scientific investigations. [The Top 10 Unexplained Phenomena] Reports started trickling in during the 1950s from people who had never heard anything unusual before; suddenly, they were bedeviled by an annoying, low-frequency humming, throbbing or rumbling sound. The cases seem to have several factors in common: Generally, the Hum is only heard indoors, and it’s louder at night than during the day. It’s also more common in rural or suburban environments; reports of a hum are rare in urban areas, probably because of the steady background noise in crowded cities. Read more of this post

Does Evolution Want Us to Be Unhappy?

July 26, 2013, 6:51 p.m. ET

Does Evolution Want Us to Be Unhappy?


Samuel Johnson called it the vanity of human wishes, and Buddhists talk about the endless cycle of desire. Social psychologists say we get trapped on a hedonic treadmill. What they all mean is that we wish, plan and work for things that we think will make us happy, but when we finally get them, we aren’t nearly as happy as we thought we’d be. Summer makes this particularly vivid. All through the busy winter I longed and planned and saved for my current vacation. I daydreamed about peaceful summer days in this beautiful village by the Thames with nothing to do but write. Sure enough, the first walk down the towpath was sheer ecstasy—but by the fifth, it was just another walk. The long English evenings hang heavy, and the damned book I’m writing comes along no more easily than it did in December. Read more of this post

The Appeal of Embarrassment: Blushing, fidgeting, looking down—the more contrite a wrongdoer looks, the more likable he seems

July 26, 2013, 7:03 p.m. ET

The Appeal of Embarrassment

Blushing, fidgeting, looking down—the more contrite a wrongdoer looks, the more likable he seems


Anthony Weineris front-page news again for all the wrong reasons. Just when he seemed to have turned a corner and become a credible candidate for mayor of New York City, he is embroiled in yet another flap over sexting. The usual has ensued: the news conference, the grim apology to disappointed supporters, the wife at his side amid murmurs of “how can she stick with him?” Watching the writhing of a celebrity caught doing something bad has become an American pastime. Regardless of the transgression, and whether it concerns a politician, athlete, actor or religious leader, there is great consistency to the spectacle of a public figure trying to seem contrite. Read more of this post

What would a world without banks look like? Converts to peer-to-peer websites such as Zopa and RateSetter believe we’re already there; Risk and reward in the p2p revolution

July 26, 2013 6:01 pm

Risk and reward in the p2p revolution

By Elaine Moore

What would a world without banks look like? Converts to peer-to-peer websites such as Zopa and RateSetter believe we’re already there – and it’s a utopia of 5 per cent returns, affordable loans to trustworthy borrowers and no hard selling of extra products. The UK government, Google and hard-nosed former Morgan Stanley chairman John Mack appear convinced, putting money behind the sector, and high street bank Santander is now considering a partnership with a peer-to-peer lender. But with interest rates almost double the equivalent offered by banks, what exactly are investors accepting in exchange for a lift in returns? Read more of this post

Why Smokers Still Smoke: The personality trait that distinguishes smokers from nonsmokers: poor self-control

July 26, 2013

Why Smokers Still Smoke


GIVEN how hazardous it is to their health, why do smokers continue to smoke? It’s not that they are all hopeless addicts. Many smokers are capable of quitting. It’s not that they are ignorant. Studies show that smokers are at least as informed as nonsmokers about the risks of smoking — and possibly more informed. You might suspect, then, that smokers tend to be risk takers by nature. And some evidence suggests that smokers do take more risks than nonsmokers: they are more often involved in traffic accidents, less likely to wear seat belts and more likely to engage in risky sexual behavior. Women who smoke even have mammograms less frequently than their nonsmoking counterparts. Read more of this post

Cash Is Trash? Not To These Value Fund Managers

Cash Is Trash? Not To These Value Fund Managers

The Federal Reserve has made it clear that short-term rates are on lockdown until the unemployment rate drops from its current 7.6 percent to 6.5 percent. That gives ammo to money managers who say “cash is trash.” A federal funds rate stuck near zero means cash will continue to deliver negative real returns for some time. Who in their right mind, the standard Wall Street taunt goes, would own cash when it’s a guaranteed losing proposition? Some standout value fund managers, that’s who.

Cash’s Value

The $1.1 billion Weitz Value and $980 million Weitz Partners Value funds each have cash stakes that are close to 30 percent. At the $10.6 billion Yacktman Focused fund, cash has crept up from 14 percent a year ago to 19 percent. The $1.3 billion Westwood Income Opportunity has about 16 percent in cash, more than double what it had at the start of the year. Cash makes up about 28 percent of assets in the $8.9 billion IVA Worldwide Fund, up from 10 percent a year ago, and is 33 percent of the $508 million GoodHaven fund, up from 19 percent a year ago. Read more of this post

Why China pays too much for medicines

Why China pays too much for medicines

Fri, Jul 26 2013

By Ben HirschlerRansdell Pierson and Kazunori Takada

(Reuters) – China has a drug problem. While most Western countries spend 10-12 percent of their healthcare budget on medicines, in China it is well over 40 percent, a disparity that goes to the heart of Beijing’s crackdown on the industry. A promise this week by GlaxoSmithKline to make its drugs more affordable in China in the wake of a bribery scandal is an important lever Chinese authorities may now use to start redressing the balance. Britain’s biggest drugmaker has given no details on the size of the price cuts it will consider, but an examination of its discounts in other emerging markets suggests there may be scope for reductions for some medicines of a third or more. Other pharmaceutical firms might have to follow suit. Read more of this post

Oppenheimer family of Stemcor steel, one of Britain’s largest private companies, pushed into spotlight in fight with India’s Jindal billionaire brothers

July 26, 2013 7:58 pm

Jindal fight puts focus on British steel trader

By Duncan Robinson

A fraternal scrap between two Indian billionaire brothers has pushed one of Britain’s largest private companies, and the family who control it, into the spotlight. The fight between the Jindal brothers aboutwho will buy steel trader Stemcor’s $800m Indian assets has dragged the London-based company into the public arena, which it has happily ignored since it was formed by a German immigrant in 1951. Its founder, Hans Oppenheimer, was raised in a middle-class Jewish family in Stuttgart before the second world war. A job with his uncle took him to Alexandria, the Egyptian port, before he and his young family settled in Orpington, a small town nestled in London’s commuter belt in 1949. It was from here that Mr Oppenheimer set up Coutinho, Caro & Co (London) – a joint venture with a German steel trading company of the same name. Read more of this post

Nate Silver, data guru and political forecaster, shows the new power of one-man brands

July 26, 2013 7:28 pm

Nate Silver, data guru returns to sport

By Andrew Edgecliffe-Johnson

The political forecaster shows the new power of one-man brands, says Andrew Edgecliffe-Johnson

Early in the 2008 US presidential campaign, a blogger on the Daily Kos website started attracting attention. Writing under the pseudonym “Poblano”, he calculated that Hillary Clinton was not faring nearly as well in the primaries as pundits said. One by one, his forecasts embarrassed the pollsters and political reporters. After months of finding flaws in others’ poll interpretations, Nate Silver outed himself. “You can’t name yourself after a chilli pepper and do much media stuff,” he said. His path from anonymity to stardom began with FiveThirtyEight, the politics site he created that year – named after the number of votes in the US electoral college. This week it culminated in a deal to move the blog from the New York Times, which has licensed it since 2010, to ESPN, Walt Disney’s sports network.

Read more of this post

The Science of Winning Poker; Bluffing still matters, but the best players now depend on math theory

July 26, 2013, 6:56 p.m. ET

The Science of Winning Poker

Bluffing still matters, but the best players now depend on math theory



More than 6,300 players, each paying an entry fee of $10,000, gathered in Las Vegas early this month for the championship event of the 44th annual World Series of Poker. The tournament ran for 10 days, and just nine players now remain. They will reunite in November for a two-day live telecast to determine who wins the first prize: $8.3 million. Poker didn’t get this big overnight. In 2003, a then-record 839 players entered the championship for a shot at $2.5 million. The winner was an amateur with the improbable name of Chris Moneymaker. After ESPN devoted seven prime-time hours to his triumph, online poker took off and tournament participation ballooned, as did prize pools. The U.S. government’s ban on the major online poker sites in 2011 reined in enthusiasm, but the game has continued to grow in Europe, Asia and Latin America. Read more of this post

Online Start-Up LearnVest Aims to Bring Financial Planning to the Masses; “Financial advice shouldn’t be a luxury. We want to disrupt the industry.”

July 26, 2013

A Start-Up Aims to Bring Financial Planning to the Masses



It’s an unfortunate fact: the people who are most in need of honest financial advice often cannot afford it, or they don’t realize that their so-called adviser isn’t an adviser at all, but a salesman. If Alexa von Tobel has her way, however, financial advice will be as widely available — and affordable — as any other mass-produced consumer product or service. Think gym memberships. It will become the perfect wedding gift for your best friend, or for adult children after they have their first baby. As the founder of LearnVest, an online financial advisory that she started four years ago, Ms. von Tobel, 29, repeats these themes several times over the course of a recent meeting to underscore what she has set out to do: deliver comprehensive and conflict-free financial advice to the middle class. “Financial advice shouldn’t be a luxury,” said Ms. von Tobel, a petite blonde with a big personality, in the company’s loftlike offices in New York. “We want to disrupt the industry.” Read more of this post

As a revitalised Coles goes from strength to strength, Woolworths has foundered amid missed opportunities and a lack of innovation. “It takes a long time to slow down the Queen Mary but once she is dead in the water she is awfully hard to restart”

Choosing the right hardware for growth

July 27, 2013

Katherine Jimenez


As a revitalised Coles goes from strength to strength, Woolworths has foundered amid missed opportunities, a lack of innovation and a misstep into the big-box hardware sector.

From the first day of Greg Foran’s appointment as Woolworths supermarket chief, one thought consumed his mind. He wanted to break Coles. The opportunity was there. Foran saw Wesfarmers’ $20 billion takeover of Coles in late 2007 as a perfect opportunity for the $40 billion supermarket juggernaut – once dubbed the ”Queen Mary” of grocery chains – to put its ”foot on the throat” of its arch-rival. Not long after his promotion in October 2008, Foran approached the then Woolworths chief Michael Luscombe and chief financial officer Tom Pockett with his grand plan. Having cut his teeth under highly regarded chief Roger Corbett during Woolworths’ golden years, Foran had pinched a leaf out of his book and believed the best weapon was to aggressively cut prices. Read more of this post

Fibra Macquarie CEO sees ‘danger’ of price bubble for Mexico’s REITs

Fibra Macquarie CEO sees ‘danger’ of price bubble for Mexico’s REITs

Fri, Jul 26 2013

By Gabriel Stargardter

MEXICO CITY (Reuters) – There is a danger that the growing value of Mexico’s real estate investment trusts could form a property price bubble, the head of Macquarie’s Mexican REIT said on Friday. The trusts, known locally as fibras, issue certificates that function much like shares on the stock exchange, and allow investors to participate in Mexico’s property market without owning buildings. But the extra liquidity generated by the funds, which have posted dizzying gains on the local bourse in recent months, has led some to suggest an inflated price bubble is around the corner, possibly resulting in painful price adjustments. Read more of this post

German media company Axel Springer, one of the largest in Europe, announced it is selling a slew of newspapers and magazines in order to focus on its digital business. The move marks a move away from journalism

07/26/2013 01:24 PM


Newspaper Giant Turns Back on Journalism

By Stefan SchultzVanessa Steinmetz and Christian Teevs

Axel Springer is poised for radical change. The German media company, one of the largest in Europe, announced Thursday it is selling a slew of newspapers and magazines in order to focus on its digital business. The move marks a move away from journalism.

On Thursday morning, the mood in the foyer of the Axel Springer building in Hamburg was one of disbelief. Staff were gathered in the same lobby where they celebrated their Christmas party just months ago. But this time, they hadn’t come to celebrate. This is not going to be easy, warned Andreas Wiele, a senior executive at Axel Springer, Europe’s largest newspaper publisher, before breaking the news that the company will be selling a clutch of its regional newspapers and women’s and television magazines to Funke Mediengruppe so that the company can focus on digital media. Bild der FrauHörzu and the Hamburger Abendblatt, a major regional daily with circulation of around 200,000, are among the publications included in the deal. Read more of this post

How QR codes are morphing into artificial reality

How QR codes are morphing into artificial reality

ON JULY 26, 2013


There may be no better example of the phrase “hindsight is 20/20” than the QR code. Once touted as the “next big thing,” those funky little squares never quite lived up to the hype, finally coming to rest as a little more than a groan-inducing memory amongst marketers.  In fact, according to a comScore study on QR codes, in 2011 only 6.2 percent of the total mobile audience in the United States had scanned a QR code on their mobile device. This leaves a whopping 93.8 percent of the total mobile audience out of the QR loop. Read more of this post

Bloomberg has quietly pulled the plug on its new wealth management business BloombergBlack just months after the financial data company began offering investment advice for individuals.

Last updated: July 26, 2013 2:39 pm

Bloomberg pulls plug on wealth management business

By Tracy Alloway in New York

Bloomberg has quietly pulled the plug on its new wealth management business just months after the financial data company began offering investment advice for individuals. “We weighed the future prospects of the business against the ongoing resource investment and concluded that it wasn’t in our best interest to continue moving forward,” a Bloomberg spokesman said. “We remain optimistic about the idea and open to the possibility of pursuing a similar business in the future.” Discussions about shutting the web-based service, which took more than three years to develop, were already in advanced stages as early as June, according to people familiar with the business. Read more of this post

Taiwan yachtmakers face struggle to stay afloat

July 26, 2013 12:28 pm

Taiwan yachtmakers face struggle to stay afloat

By Sarah Mishkin

Truckers at Bluewater Yacht Builder struggle to load a megayacht on to a truck that will help the 30-tonne luxury boat begin its journey to its new owner in California. While the task may be tricky, at least this Taiwanese company has a buyer. Taiwan recently overtook Germany to become the world’s sixth-largest yachtmaker, with 43 boats under construction. Yet despite this, sales are much lower than before the 2008 financial crisis. Production at yards across the country hit $148m last year, down from $357m in 2008. Read more of this post

China sovereign wealth fund downgrades commodities

July 26, 2013 1:31 pm

China wealth fund downgrades commodities

By Simon Rabinovitch

China’s sovereign wealth fund has switched emphasis away from commodities to financial stocks in its overseas equity holdings over the past year. The investment shift by China Investment Corp is notable because the fund is uniquely placed to make a call about the global commodities market, with Chinese demand one of the biggest drivers of prices. Since its establishment in 2007 CIC had focused most heavily on commodities. But the fund, which had $575bn of assets under management at the end of last year, changed tack as Chinese growth slowed. Less than 17 per cent of CIC’s overseas equity holdings were in the energy and materials sectors, according to its annual report published on Friday. That was down from 23 per cent at the end of 2011. Read more of this post

Darwin, Japan and the origin of outperformance

July 26, 2013 6:02 pm

Darwin, Japan and the origin of outperformance

By Merryn Somerset Webb

Things that there are too many of. It’s a long list. But if you turn your thoughts to the financial industry you will see that the standout is investment funds. I have no idea how many funds there actually are available to chip away at your savings in the UK, but you can choose between over 2,000 at the top fund supermarkets alone. On that basis I would guess at 7,000-10,000 in total.

Most of those will be rubbish one way or another, which of course is why the average active fund regularly underperforms any given index. So here’s an interesting thing to wonder about at the beach this year: what if a 20-year bear market meant none of the big houses bothered to market funds in one particular sector any more? Read more of this post

The cult of home ownership is dangerous and damaging; The US and UK should ditch their obsessions with residential property, writes Adam Posen

July 26, 2013 7:28 pm

The cult of home ownership is dangerous and damaging

By Adam Posen

The US and UK should ditch their obsessions with residential property, writes Adam Posen

You would think that the residential property bubble and subsequent crisis of the past decade would make people leery of widespread home ownership, and governments reluctant to pump it up. Yet, here we are again. Despite the continuing fiscal tightening, the UK coalition government is pressing on with its “Help to Buy” scheme and the US Congress continues its unquestioning protection of the home mortgage interest tax deduction. This is the economic policy equivalent of incurring the individual and social costs of an obesity epidemic while still subsidising maize and beef production – but maybe more fixable. Read more of this post

Emerging market growth story dies

Last updated: July 26, 2013 11:44 am

Emerging market growth story dies

By Jonathan Wheatley

An uncomfortable truth is making itself felt around the world of emerging market investors: the emerging market growth story is dead. This is not to say that emerging economies will no longer grow. Nor even that emerging market assets will no longer deliver attractive returns. But the days are long gone when “emerging markets” could be seen as a single asset class. More than that: as David Lubin, head of emerging market economics at Citigroup puts it, the very “foundation myth” of the emerging markets no longer holds true. “The EM story is based on rapid growth, led by exports, which delivers large current account surpluses, which leads to the accumulation of foreign exchange reserves and the expansion of domestic credit,” he says. “Every single element of that story is no longer true.” Read more of this post

‘King of Beers,’ Fizzling in U.S., Sets Goal of World Domination; Anheuser-Busch InBev is making a bold move into China, the largest and most elusive prize

Updated July 27, 2013, 12:00 a.m. ET

‘King of Beers,’ Fizzling in U.S., Sets Goal of World Domination

Anheuser-Busch InBev is making a bold move into China, the largest and most elusive prize



Budweiser ads drape the windows of banquet halls and karaoke bars in China. It’s all part of Anheuser-Busch InBev’s effort to transform America’s King of Beers into a truly global brand. WSJ’s Mike Esterl reports. ZIYANG, China—Little of the Western world has infiltrated this dusty city in China’s rural hinterland, where red lanterns hang from lampposts and restaurants serve pig tail and duck neck. But Americans would recognize a beer increasingly making the rounds here: Budweiser, which flows from a state-of-the-art brewery built below a hilltop pagoda. Advertisements for the 137-year-old brand from St. Louis, Mo., drape the windows of a banquet hall, trumpeting the year of the snake. The walls, floors and stairs of a karaoke bar are blanketed with Budweiser’s red bow tie and gold crown symbols. On a narrow back street, three hot pot restaurants serve the beer. “It’s brewed in Ziyang. I’m very proud of that,” says Li Mei, manager at the “Very Hot Hot Pot.” Read more of this post

Industrialization has turned much of the Chinese countryside into an environmental disaster zone, threatening not only the food supply but the legitimacy of the regime itself

July 26, 2013, 6:33 p.m. ET

China’s Bad Earth

Industrialization has turned much of the Chinese countryside into an environmental disaster zone, threatening not only the food supply but the legitimacy of the regime itself.


In Dapu, a rain-drenched rural outpost in the heart of China’s grain basket, a farmer grows crops that she wouldn’t dare to eat. A state-backed chemicals factory next to her farm dumps wastewater directly into the local irrigation pond, she says, and turns it a florescent blue reminiscent of antifreeze. After walking around in the rice paddies, some farmers here have developed unexplained blisters on their feet. “Nothing comes from these plants,” says the farmer, pointing past the irrigation pond to a handful of stunted rice shoots. She grows the rice, which can’t be sold because of its low quality, only in order to qualify for payments made by the factory owners to compensate for polluting the area. But the amount is only a fraction of what she used to earn when the land was healthy, she says. The plants look alive, “but they’re actually dead inside.” Read more of this post

What Warehouses? Amazon’s Quarterly Message Is All Digital; “This past quarter, our top 10 selling items worldwide were all digital products – Kindles, Kindle Fire HDs, accessories and digital content”

July 25, 2013, 6:44 PM

What Warehouses? Amazon’s Quarterly Message Is All Digital

By Tom Gara

One interesting line from Amazon’s Jeff Bezos, announcing quarterly results today:

“We’re so grateful to our customers for their response to Kindle devices and our digital ecosystem. This past quarter, our top 10 selling items worldwide were all digital products – Kindles, Kindle Fire HDs, accessories and digital content,” You would expect something close to this — of the company’s ten best selling electronics items, five are Kindles. In its Movies & TV category, the top three are all streaming items from Amazon’s Instant Video service, as are eight of the top ten. So long, DVDs! Amazon had $15.7 billion in sales in the quarter, and while it didn’t make any money — it lost $7 million — growing sales by 22% is still pretty impressive for a company this size. That was helped along by some of the newer, less conventional parts of the company’s digital business — Amazon Web Services, the cloud computing business, was responsible for almost 15% of the growth in U.S. revenues. For another sense of where management’s priorities are — or at least where management wants to say its priorities are — take a look at the “Highlights” section of the earnings announcement. Of the 19 dot-pointed highlights, only one is devoted to the company’s historical business of online retailing — a mention of the launch of its marketplace in India. Four more talk about achievements in the Amazon Web Services business, and the rest — the other 14 — are about the Kindle and its digital content store, or Amazon’s wider digital media business.

J.P. Morgan to Sell Commodities Business

Updated July 26, 2013, 7:54 p.m. ET

J.P. Morgan to Sell Commodities Business

Move Comes Amid Regulatory Scrutiny of Wall Street



NEW YORK—The largest U.S. bank is getting out of the power-plant and warehouse business, amid heightened regulatory scrutiny of Wall Street’s ownership of such assets. J.P. Morgan Chase JPM -0.80% & Co. said Friday it is putting its physical commodities operation up for sale, a major retreat for a company that last decade made a costly and bold effort to become No. 1 in the commodities field. J.P. Morgan joins rivals Goldman Sachs Group Inc. GS -0.39% and Morgan Stanley,MS -0.22%  which also are seeking buyers for such holdings. Regulators in recent months have ratcheted up scrutiny of banks’ power-market operations. The Federal Energy Regulatory Commission’s enforcement staff in March accused J.P. Morgan of manipulating energy markets in California and the Midwest. J.P. Morgan denied the accusations in a written response to FERC. The company is negotiating a $410 million settlement that would resolve those allegations. The Federal Reserve, meanwhile, is reviewing a decade-old policy allowing banks to hold physical commodity assets. Read more of this post

Deal Initiation in Mergers and Acquisitions

Deal Initiation in Mergers and Acquisitions

Ronald W. Masulis University of New South Wales – Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)

Serif Aziz Simsir Sabanci University

June 30, 2013
ECGI – Finance Working Paper No. #371

This study investigates deal initiation in the context of mergers and acquisitions. We investigate how bidder and target initiated merger offers differ. Our analysis reveals that target financial or economic weakness, target financial constraints and economy wide shocks are important motives for target-initiated deals. We also find that average bid premiums, target cumulative abnormal returns (CAR) measured around the merger announcement dates and the deal value to EBITDA multiples of target-initiated deals is significantly lower than in bidder-initiated deals. However, this gap cannot be explained by weaker financial conditions of targets immediately prior to merger announcements. After adjusting for self-selection, we find evidence that the private information held by target firms is the main driver of the lower premiums observed in target-initiated deals. Supporting this perspective, the premium gap between bidder- and target-initiated deals widen when the information asymmetry between the merging firms gets higher.

Moody’s Sees Local Chinese Debt Default as $21 Billion Matures

Moody’s Sees Local Default as $21 Billion Matures: China Credit

Local-government financing vehicles need to repay a record amount of debt this year, prompting Moody’s Investors Service to warn Premier Li Keqiang may set an example by allowing China’s first onshore bond default.

Some 127 billion yuan ($21 billion) of so-called LGFV notes expire in the second half, according to Everbright Securities Co., the most in its data going back to 2000 and more than double the 62.7 billion yuan that matured in the first six months. The yield premium over top-rated notes for one-year AA debt, the most common rating for LGFVs, widened to 67 basis points yesterday, the highest level since Jan. 16, Chinabond data show. The comparable gap in India is 47. Read more of this post

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