Master limited partnerships have benefited from low rates and an energy boom. But what’s next?

SATURDAY, AUGUST 10, 2013

Boom… or Bust?

By DIMITRA DEFOTIS | MORE ARTICLES BY AUTHOR

Master limited partnerships have benefited from low rates and an energy boom. But what’s next?

Income-oriented investors have had a tough time recently. Low bond yields and pricey dividend stocks have made it tough for an investor to find a little yield, let alone growth. Except, that is, in master limited partnerships. This quirky corner of the market beat the Standard & Poor’s 500 for 11 years running, by an average of 20 percentage points, until 2012. Read more of this post

China Builds All in Changsha Rail to Top-Tower Projects

China Builds All in Changsha Rail to Top-Tower Projects

Yang Feng takes a drink from his water bottle as he rests in the shade of a tree near the foot of the Poly International Plaza building where he’s installing lights on the roof of the $653-million real estate development in the central Chinese city of Changsha.

From his perch atop a 150-meter (492 feet) residential tower, he can make out workers rushing to complete a tunnel project under the city’s Xiangjiang River that will cost 1.3 billion yuan ($212 million). About 30 minutes’ drive away, preparatory work has begun on what a local company says will be the tallest building in the world, with 202 floors. And China Development Bank Corp., the state lender, has pledged 14.25 billion yuan for completion of an intercity rail line connecting Changsha with other cities in Hunan province. Read more of this post

Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom

Americans Giving Up Passports Jump Sixfold as Tougher Rules Loom

Americans renouncing U.S. citizenship surged sixfold in the second quarter from a year earlier as the government prepares to introduce tougher asset-disclosure rules.

Expatriates giving up their nationality at U.S. embassies climbed to 1,131 in the three months through June from 189 in the year-earlier period, according to Federal Register figures published today. That brought the first-half total to 1,810 compared with 235 for the whole of 2008. Read more of this post

China Factories Turn to Undocumented Foreign Labor as Local Wages Jump

China Factories Turn to Undocumented Labor as Local Wages Jump

China’s embrace of higher wages to help bolster consumer spending has sparked a jump in factories along the east-coast export corridor bringing in undocumented and lower-paid workers from Myanmar and Vietnam.

Border police found 59 illegal immigrants from Vietnam in a bus heading for the Pearl River Delta on July 29, the official Xinhua news agency reported on Aug. 6. “Thousands” of workers from Vietnam and Myanmar were discovered working illegally in Shenzhen between 2010 and 2012, the state-run China News Service reported, citing a local prosecutor. Read more of this post

German Regulators Said to Review Off-Balance-Sheet Loans

German Regulators Said to Review Off-Balance-Sheet Loans

German regulators will review how the country’s banks made loans that didn’t appear on their balance sheets, obscuring the risk to investors, said two people briefed on the talks.

The inquiry, led by the Bundesbank and Bafin, will focus on whether banks properly applied accounting rules when making the loans, said one of the people, who asked not to be identified because the investigation hasn’t been made public. The review is likely to take several months, the person added. Read more of this post

China H-Shares to Drop 30% in 2013, Societe Generale Says

China H-Shares to Drop 30% in 2013, Societe Generale Says

Chinese companies traded on the Hong Kong stock market will slide the most in five years in 2013 as an economic slowdown weighs on profits and banks curtail credit, according to Societe Generale SA.

The Hang Seng China Enterprises Index will drop to 8,000 by year-end, said Guy Stear, Hong Kong-based head of Asia research at Societe Generale. That’s 16 percent below yesterday’s close and would extend the gauge’s 2013 decline to 30 percent, the biggest tumble since 2008. China’s manufacturing will contract this year, while bad loans will keep rising until late 2014, Stear said. Read more of this post

Taiwanese authorities said a water leak that began 3 1/2 years ago inside a state-owned atomic power plant is yet to be halted, as lawmakers debate whether to put the island’s nuclear future to an island-wide vote.

Taiwan Says Nuclear Water Still Leaking Inside Power Plant

Taiwanese authorities said a water leak that began 3 1/2 years ago inside a state-owned atomic power plant is yet to be halted, as lawmakers debate whether to put the island’s nuclear future to an island-wide vote.

About 19.8 liters (5.2 gallons) has been collected from two leaking used-fuel pools inside Taiwan Power Co.’s No. 1 plant in the period, according to a report from the state oversight body, the Control Yuan. The Ministry of Economic Affairs was faulted for failing to properly supervise the utility, the report shows. Read more of this post

The $1M Check That Sat in a Drawer: How Detroit Went Bust; Underlying poor service is a government that lacks modern technology and can’t perform such basic functions as bill collecting

The $1M Check That Sat in a Drawer: How Detroit Went Bust

In late February, cash-strapped Detroit received a $1 million check from the local school system that wasn’t deposited. The routine payment wound up in a city hall desk drawer, where it was found a month later.

This is the way Detroit did business as it slid toward bankruptcy, which it entered July 18. The move exposed $18 billion of long-term obligations in a city plagued by unreliable buses, broken street lights and long waits for police and ambulances. Underlying poor service is a government that lacks modern technology and can’t perform such basic functions as bill collecting, according to Kevyn Orr, Detroit’s emergency manager. Read more of this post

Norway’s oil fund has raised its holdings in equities to a record level as the world’s largest sovereign wealth fund continues to demonstrate its dislike of bond markets. Norway Fund Says Emerging Market Slump Curbed Returns

Last updated: August 9, 2013 12:04 pm

Norwegian oil fund raises equity holdings

By Richard Milne in Oslo

Norway’s oil fund has raised its holdings in equities to a record level as the world’s largest sovereign wealth fund continues to demonstrate its dislike of bond markets. Equities accounted for 63.4 per cent of the fund at the end of the second quarter while bonds represented just 35.7 per cent, a record low. “I have said before it is less a reflection of enthusiasm for the equity markets and more a lack of enthusiasm for the bond markets,” said Yngve Slyngstad, chief executive of the $760bn oil fund. Read more of this post

After 9 years, Tesco gives up on cracking China alone

After 9 years, Tesco gives up on cracking China alone

6:19am EDT

By Denny Thomas, Donny Kwok and Neil Maidment

HONG KONG/LONDON (Reuters) – After nine years in China, British supermarket firm Tesco (TSCO.L: Quote,Profile, Research, Stock Buzz) is to fold its unprofitable operation into a state-run company as a minority partner, becoming the latest foreign retailer to give up on trying to crack China on its own. Lured by the prospect of a rapidly growing middle class in the world’s second-biggest economy, many foreign firms have waded into China’s retail market only to find they lack local expertise, particularly in building supplier relationships. The world’s No.3 retailer said on Friday it was in talks to team up with China Resources Enterprise Ltd (CRE) (0291.HK: Quote, Profile, Research, Stock Buzz), a move that follows decisions to abandon the United States and Japan and focus on investing in its British home market. Read more of this post

Chinese official warns of excessive “empty cities”

Chinese official warns of excessive “empty cities”

(Xinhua)    15:31, August 10, 2013

Reckless expansion of cities in China has left many of them empty, according to a Chinese economic planning official. Qiao Runling, deputy director of the China Center for Urban Development under the National Development and Reform Commission, said local governments had relied on quick urbanization to stimulate economic growth and generate fiscal revenue. “Nearly every big or medium-sized city across China has plans to erect a new town,” Qiao said, quoting the result of his research at a forum on urban development held in Jiangxi Province this week. According to the official, new towns are usually bigger than old ones and many cities are left empty as a result. “China now has an oversupply of cities, given the number of new urban districts that we have,” Qiao said, adding that the excess of new urban districts are especially serious in medium and small-sized cities in central and western parts of the country. Qiao warned that China’s modern urbanization should no longer be bolstered by investment or construction projects but focus on structural reform.
Official statistics showed that land used for urban construction rose by 83.41 percent from 2000 to 2010, while the urban population saw an increase of 45.12 percent in the period

$1 bn stolen in China low-cost housing programme: govt

$1 bn stolen in China low-cost housing programme: govt

Friday, August 9, 2013 – 17:24

AFP

BEIJING – China’s affordable housing programme lost nearly $1 billion to embezzlement last year, the national auditor reported on Friday, underscoring the obstacles to official efforts to fight graft. About 5.8 billion yuan ($950 million) went towards “loan repayment, foreign investment, land requisition and house demolitions, office cash flow and other expenses not related to affordable-housing projects”, the National Audit Office said on its website. Read more of this post

Plane skids off runway as heat melts tarmac in China’s Zhejiang

Plane skids off runway as heat melts tarmac in Zhejiang

Staff Reporter 2013-08-09

The Air China airbus, off the mark. (Photo/CFP); The wheels of the aircraft stuck on the runway. (Internet photo)

Seventy-four passengers aboard an Air China flight ended up off the runway when the plane skidded out of control at Yiwu airport in Zhejiang province in eastern China. Fortunately, no casualties were reported, according to the local Qianjiang Evening Post. The main wheels of flight CA4538 sunk into a pothole as it rolled down the runway when preparing to take off, which effectively disabled the aircraft. The airport was closed immediately after the accident. The passengers on the plane disembarked and the plane was moved onto a safe surface. More than 200 passengers in the airport were transferred to Xiaoshan airport in the provincial capital Hangzhou. The state of the asphalt was attributed to the record-setting heatwave currently affecting Zhejiang and most of south China where temperatures have risen above 40°C.

In Deal Hunt, Big-Game Buffett Settles for Small Prey; Berkshire Hathaway Boss Trains His ‘Elephant Gun’ on Junior-Sized Targets With Larger Ones Scarce

Updated August 8, 2013, 4:38 p.m. ET

In Deal Hunt, Big-Game Buffett Settles for Small Prey

Berkshire Hathaway Boss Trains His ‘Elephant Gun’ on Junior-Sized Targets With Larger Ones Scarce

ANUPREETA DAS

Warren Buffett hasn’t fired his “elephant gun” much recently, but he has put his managers on the hunt for smaller prey. Berkshire Hathaway Inc.’s BRKB +0.72% subsidiary operations collectively spent about $2.3 billion on 26 acquisitions last year, which the company says is a record amount. They have continued that streak this year, acquiring more than a dozen companies in the first half of 2013. Berkshire hasn’t disclosed the amount spent by its subsidiaries on acquisitions this year. With bigger, multibillion-dollar deals few and far between of late, Mr. Buffett increasingly favors such “bolt-on” acquisitions because they increase Berkshire’s earnings and enable it to use its cash pile, which stood at $36 billion at the end of June. Net cash flow from operations rose nearly 36% for the first six months of 2013 from a year earlier, putting greater pressure on Berkshire to use its cash rather than hoard it. In a telephone interview, the Omaha, Neb.-based billionaire investor said he expected these types of deals to be frequent and numerous. “I like the managers finding opportunities,” Mr. Buffett said. Read more of this post

Bill Gross’ Strategy for Combating Rising Rates; The Pimco chief explains how to alter a bond portfolio for a new set of circumstances

THURSDAY, AUGUST 8, 2013

Bill Gross’ Strategy for Combating Rising Rates

By WILLIAM H. GROSS  | MORE ARTICLES BY AUTHOR

The Pimco chief explains how to alter a bond portfolio for a new set of circumstances.

Adaptation is tantamount to survival in the physical world. So argued Darwin, at least, and I am not one to argue with most science and its interpretation of natural laws. Adaptation has been critical as well for the survival of countries during wartime, incidents of which I am drawn to like a bear to honey, especially when they concern WWI. Stick with me for a few paragraphs on this – the following is not likely to be boring and almost certainly should be instructive. In the first decade of the 20th century, British war colleges and their generals were philosophically trapped by the successful strategies of a prior era – an era before the invention of a functional machine gun. They felt that machine guns might dampen the spirit of their fighting forces. What counted was the horse and the sword. Britain’s cavalry training manual of 1907 in fact stated that “the rifle or machine gun, effective as it is, cannot replace the devastation produced by the speed of the horse, the magnetism of the charge, and the terror of cold steel.” Read more of this post

LKY: Mao Promoted Perpetual Struggle; Deng Saved China from Chaos

Mao Promoted Perpetual Struggle; Deng Saved China from Chaos

by Lee Kuan Yew | Aug 8, 2013

Mao’s successor drew lessons from Singapore’s economic development

On October 1, 1949, at the Gate of Heavenly Peace in Beijing, Mao Zedong, leader of the Communist Revolution, declared the founding of the modern People’s Republic of China. Mao was an idealist who strove for constant class struggle as a way to keep the Chinese from becoming bourgeois. At the height of the Cultural Revolution, in 1967-69, schools and universities were closed, and children were encouraged to hit and rebel against their parents. Mao was, of course, a famous leader and liberator, but he was less practical when it came to governing the country.

More practical was Deng Xiaoping, who quietly took control after Mao’s death, calmed the country and concentrated on its economic development. Were it not for him, China might well have broken apart. Read more of this post

Discount Grocery Chain WinCo Touted As ‘Wal-Mart’s Worst Nightmare’ with a business model that allows for cheaper prices

A Discount Grocery Chain Is Being Touted As ‘Wal-Mart’s Worst Nightmare’

ASHLEY LUTZ AUG. 8, 2013, 5:32 PM 5,562 30

A discount grocery chain is being called “Wal-Mart’s worst nightmare.” WinCo, a Western grocery chain with about 100 stores, has a business model that allows for cheaper prices than Wal-Mart, writes Brad Tuttle at Time.  WinCo keeps costs low by buying directly from suppliers and eliminating middlemen, according to Tuttle. It also doesn’t accept credit cards and has customers bag their own groceries. A recent Idaho Statesman article about WinCo quoted retail analyst Burt Flickinger III as saying that WinCo was “unstoppable.” “They’re Wal-Mart’s worst nightmare,” Flickinger said.  Much like Costco, WinCo offers a minimalist selection instead of a wide array of brands according to Time. For instance, WinCo might only carry two brands of toothpaste, while Wal-Mart has more than 40. Unlike Wal-Mart, whose employees have demanded better wages, the company provides health benefits to employees who work 24 hours per week and a pension. WinCo is expanding fast, and could convert Wal-Mart’s customers, according to Time. “Generally speaking, shoppers tolerate Walmart’s empty shelves and subpar customer service because the prices are so good,” Tuttle writes. “The fact that another retailer—even a small regional one—is able to compete and sometimes beat Walmart on prices, while also operating well-organized stores staffed by workers who enjoy their jobs, like their employer, and genuinely want the company to be successful.”

Nestlé Feels Commodity Crunch; Missed Sales Expectations Four Quarters in a Row; Nestlé got a serious lift over the past few years from rising commodity costs. It was able to pass these on, and perhaps a bit more, to consumers

August 8, 2013, 2:39 p.m. ET

Nestlé Feels Commodity Crunch

Sales Expectations Have Been Missed Four Quarters in a Row, and a Couple More May Be Needed to Get Back on Track

JOHN JANNARONE

Nestlé NESN.VX -2.16% shares are a bit like its sugary treats: After providing a burst of energy, they have left investors in a funk. The Swiss food conglomerate fell short of revenue expectations for the fourth quarter in a row Thursday, when it reported results for the three months through June. Nestlé acknowledged that it will be “a stretch” to achieve 5% organic sales growth this year, meaning it may miss its typical 5%-6% target. That suggests Nestlé got a serious lift over the past few years from rising commodity costs. It was able to pass these on, and perhaps a bit more, to consumers. But prices of many inputs like sugar have declined over the past several months. That leads to competitive pressure that erodes pricing power. As Andrew Wood of Sanford C. Bernstein points out, Nestlé’s second-quarter pricing growth of 0.8% was the lowest in a decade. It is hard to guess when commodity prices will rebound. Emerging-market growth, a big driver of commodity demand, has cooled and may take a couple of years to resume. Read more of this post

Goldman: China might face credit losses of up to 18.6 trillion yuan ($3 trillion), because the speed of its credit expansion has exceeded that seen prior to other credit crises in history

Credit losses may hit $3 trillion, bank says

Updated: 2013-08-09 07:25

By Wang Xiaotian ( China Daily)

Goldman Sachs report warns of ‘shadow banking‘ risk elements

China might face credit losses of up to 18.6 trillion yuan ($3 trillion), because the speed of itscredit expansion has exceeded that seen prior to other credit crises in history, Goldman SachsGroup Inc has warned. In a report dated Aug 5, it said the rapid pace of China’s credit expansion, increasingly sourcedfrom the inherently more risky and less transparent “shadow banking” sector, has become atop concern for global markets. “Our Asian economists and strategists recently published a comprehensive look at this concernand its implications for economic growth and asset performance in China, calculating that anextreme upper-bound for total China credit losses could amount to 18.6 trillion yuan,” the reportsaid. But actual credit losses are likely to be significantly lower than these worst-case figures,emerge gradually and be partially absorbed by bank earnings or other avenues, it added. Read more of this post

China’s Urban Sludge Dilemma: Sinking in Stink; Trucks are dumping sludge on melon fields near Beijing, highlighting a nationwide struggle with waste

08.08.2013 16:12

China’s Urban Sludge Dilemma: Sinking in Stink

Trucks are dumping sludge on melon fields near Beijing, highlighting a nationwide struggle with waste

By staff reporter Cui Zheng and intern reporter Liu Zhiyi

Promptly at noon on March 17, a heavy truck hauling a dark substance and on a dark mission pulled out of the Gaobeidian Wastewater Treatment Plant in eastern Beijing. A wastewater treatment engineer helped a Caixin reporter identify the unusual load, which jiggled in the truck’s bed like gelatin as the driver headed down a bumpy road. The substance was unprocessed sludge – a mucky, smelly and hazardous byproduct of the sewage treatment process. Anything less disgusting coming out of the Gaobeidian plant, the engineer said, would not have jiggled. Gaobeidian is one of the largest wastewater plants in China and the biggest in Beijing, serving the capital’s downtown business district and industrial zones along with about 2.4 million household residents. It handles some 40 percent of Beijing’s wastewater, and has a daily wastewater capacity of about 1 million cubic meters. The plant is one of many built over the past seven years as part of a 500 million yuan, central government push to upgrade wastewater treatment nationwide. The investment has shown some good results: The collective sewage treatment capacity in China’s counties, for example, has risen to more than 70 percent. Read more of this post