How Many ‘Greater Fools’ Does It Take to Make a Bubble?

Sep 27, 2013

THE INTELLIGENT INVESTOR

How Many ‘Greater Fools’ Does It Take to Make a Bubble?

JASON ZWEIG

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Where do market “bubbles” come from? A team of neuroscientists and economists has produced the first scientific evidence for what prudent investors have long believed: Paying attention to what others are doing is the easiest way for traders to get carried away. This new research can’t prevent the mass contagions that lead to bubbles. But it might help you step back before you get swept up in the next one. Economists have struggled and failed to explain why markets turn into manias. Some have denied bubbles exist; others have argued bubbles must somehow be “rational.” Often, the argument is that bubbles are caused by “uninformed” traders, or “dumb money,” while the “smart money” sits on the sidelines. The latest findings suggest, however, that bubbles might be caused not by traders who lack information but by those who have too much.

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New Warning Issued on China Local Government Debt

September 27, 2013, 2:04 p.m. ET

New Warning Issued on China Local Government Debt

WILLIAM KAZER

BEIJING—China’s local government debt has nearly doubled since 2010, an official newspaper reported Friday, raising fresh concerns about potential repayment problems and the health of the banking system. The state-run Economic Information Daily, quoting the results of a government audit, didn’t give a figure for the new level of local debt. But a doubling of the total found in the last audit in 2010 would put the tally at around 20 trillion yuan ($3.28 trillion)—or almost 39% of the nation’s gross domestic product last year. China has been concerned that local-government debt levels were rising quickly as economic growth slowed and local administrations and the companies they hold stepped up borrowing to give the economy a helping hand. Most of China’s local governments are forbidden from borrowing money directly, so they have created local-financing vehicles to skirt the restrictions and raise funds for infrastructure and other projects. Those vehicles racked up massive debt levels in 2009 and 2010 as China rolled out a giant infrastructure-based stimulus program in the wake of the financial crisis. Read more of this post

2,564 Birthday anniversary of Confucius celebrated around China

Birthday anniversary of Confucius celebrated around China

(Xinhua)    16:44, September 28, 2013

A performer takes part in a memorial ceremony to mark the 2,564th birthday anniversary of Confucius at the Confucius Temple in Qufu, east China’s Shandong Province, Sept. 28, 2013. Qufu is known as the hometown of the great Chinese philosopher and educator Confucius. (Xinhua/Guo Xulei)

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Have-Nots Squeezed and Stacked in Hong Kong

September 27, 2013

Have-Nots Squeezed and Stacked in Hong Kong

By BETTINA WASSENER and GRACE TSOI

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In Hong Kong, a Cubicle to Call Home: One of Asia’s premier banking, trading and logistics centers is a difficult place for low-income residents to live.

HONG KONG — On the first floor of a hulking residential building, at the end of a dimly lighted corridor, a narrow door opens up into Hong Kong’s economic underbelly. Twenty-two men live in this particular 450-square-foot apartment in the neighborhood of Mong Kok, in cubicles each hardly larger than a single bed, stacked above one another along two narrow passageways that end in a dank toilet and shower room. Each cupboardlike cubicle has a sliding door, a small television, some shelves and a thin mattress. Most of the men have lived here for months, some for years. “Luckily there is air-conditioning. If not, sleeping would be impossible,” said Ng Chi-hung, 55, who is unemployed and occupies one of the bottom bunks. “If you live in such environment, you have to adapt to everything.” Read more of this post

Book Review: ‘David and Goliath’ by Malcolm Gladwell

September 27, 2013, 6:07 p.m. ET

Book Review: ‘David and Goliath’ by Malcolm Gladwell

Malcolm Gladwell too often presents as proven laws what are just intriguing possibilities and musings about human behavior.

CHRISTOPHER F. CHABRIS

David Boies is the super-lawyer who represented IBM against the U.S. government, the U.S. government against Microsoft, Al Gore against George W. Bush and gay marriage against California’s Proposition 8. A man at the top of his profession, presiding over a firm of 200 lawyers, he would seem to be a metaphorical Goliath. But Malcolm Gladwell sees this literal David as a figurative David too, because Mr. Boies came from humble origins and faced mighty obstacles to success. Read more of this post

The “Breaking Bad” school: The best show on television is also a first-rate primer on business

The “Breaking Bad” school: The best show on television is also a first-rate primer on business

Sep 28th 2013 |From the print edition

THERE are obvious reasons for watching “Breaking Bad”: for once the Hollywood hype surrounding the television series is justified. But there is also a less obvious reason: it is one of the best studies available of the dynamics of modern business. A Harvard MBA will set you back $90,000 (plus two years’ lost income). You can buy a deluxe edition of all five seasons of “Breaking Bad”, complete with a plastic money barrel, for $209.99, or a regular edition for less than $80. Read more of this post

James Packer’s former money man shares the billionaire’s top tips: You only need one or two very good ideas per year

Matthew Smith Reporter

James Packer’s former money man shares the billionaire’s top tips

Published 27 September 2013 10:13, Updated 27 September 2013 10:14

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Paul Skamvougera: You only need one or two very good ideas per year

It’s been a rapid rise for Paul Skamvougeras, who took over from Perpetual’s star fund manager John Sevior in July 2011. Despite his background in managing money for James Packer, investors weren’t immediately convinced with the replacement. “He might be good but is he Sevior good?” they asked. Fast forward two years and its “John who?” after “Skamma” notched up a 31.2 per cent return to July 31. Now he’s been asked to step into the breach once more following the departure of Charlie Lanchester. Today Skamvougeras talks about his three biggest positions and what he learnt from James Packer.  Read more of this post

Howard Schultz: What Next, Starbucks? The coffee CEO on the future of the company, from modern drive-thrus to wine and kale

September 27, 2013, 8:24 p.m. ET

Howard Schultz: What Next, Starbucks?

The coffee CEO on the future of the company, from modern drive-thrus to wine and kale

ALEXANDRA WOLFE

Starbucks SBUX +0.19% CEO Howard Schultz says he’s never been a “coffee person.” Sitting in his sprawling Seattle office overlooking Puget Sound, he says that what he’s always been is a merchant. It’s a title he is particularly comfortable with one morning earlier this month. A few hours before, his company’s stock price reached $76.24 a share, the highest it had been in its 42-year history. Read more of this post

Björn Wahlroos may be the most important business executive in Finland. Chairman of three of the biggest companies in the Nordic region – Nordea, the bank, Sampo, the financial services group, and UPM-Kymmene, the paper producer

September 22, 2013 5:15 pm

Finland’s former revolutionary

By Richard Milne

©Bloomberg

Not-so-cuddly: Björn Wahlroos’s nickname of Nalle, a term similar to teddy bear in English, belies his reputation

Björn Wahlroos may be the most important business executive in Finland. Chairman of three of the biggest companies in the Nordic region – Nordea, the bank, Sampo, the financial services group, and UPM-Kymmene, the paper producer – the dapper 60-year-old is renowned in his homeland almost as much for his sharp tongue as for his business prowess. Widely known as Nalle – similar to teddy bear in English – his life has followed an extraordinary trajectory. “I think it’s a great story” he says. Read more of this post

David Ek, the founder of Spotify talks about changing the music business and why ‘screwed-up’ healthcare might be next

September 27, 2013 2:19 pm

Lunch with the FT: Daniel Ek

By Andrew Edgecliffe-Johnson

The founder of Spotify talks about changing the music business and why ‘screwed-up’ healthcare might be next. Plus, listen to his top 10 favourite tracks

The elevated railroad that once ran down Manhattan’s west side was known as New York’s “Life Line”. Erected in 1934, it brought meat and other merchandise to the city’s warehouses from across the US. The last turkeys were unloaded in 1980 though and weeds grew over the steel strip between the West Village and Chelsea until 2009 when, renovated by wealthy locals, the Life Line reopened as the High Line, a fashionable urban park. Read more of this post

The Monkey Business of Pure Altruism

September 27, 2013, 8:30 p.m. ET

The Monkey Business of Pure Altruism

ROBERT M. SAPOLSKY

I’ve been reflecting on how Bill and Melinda Gates resemble a pair of monkeys. Earlier this month, the Lasker Awards were announced. The prestigious prize, known as the “American Nobel,” is given annually to a few extraordinary biomedical scientists. A Lasker for public service is also usually awarded—this year to the Gateses. Great move. They’ve given vast sums of money to medical research and have galvanized other billionaires into doing the same. They’ve targeted research about diseases that bring incalculable misery to the developing world. All with great wisdom. Read more of this post

Kelcy Warren, the billionaire running the third-largest U.S. natural gas pipeline company, says the days of deal making are returning

Pipeline Billionaire Ready for Next Round of Deal Making: Energy

Kelcy Warren, the billionaire running the third-largest U.S. natural gas pipeline company, says the days of deal making are returning. Railroads and competing pipeline operators are taking market share, leaving networks with smaller regions and struggling to find business. To survive, companies need a geographically diverse portfolio of assets across an array of oil and gas products that can weather slowdowns in individual sectors or regions, Warren, chairman and chief executive officer of Energy Transfer Partners LP (ETP), said in an interview. Read more of this post

Jack Ma, the head of China’s Alibaba, heading to Wall Street with global ambitions in online commerce

September 27, 2013 7:17 pm

Jack Ma, the mogul heading to Wall Street

By Jamil Anderlini

The head of China’s Alibaba has global ambitions in online commerce, says Jamil Anderlini

Jack Ma may, at first glance, look a slightly geeky-looking retailer. But in his native China the 49-year-old founder of Alibaba Group enjoys the status of a rock star, as the symbol of a generation on the move. And like many rockstars Mr Ma is prone to bouts of petulance – something the former English teacher proved again this week when he picked a fight with Hong Kong’s stock market authorities. The world’s largest e-commerce marketplace wants to sell shares in an initial public offering in Hong Kong that bankers say could raise $15bn and value it at up to $120bn. But after Hong Kong regulators refused to agreeto its terms, Alibaba quit the stage and started the process of listing in the US instead. Read more of this post

Rethinking equity after Alibaba

September 27, 2013 6:57 pm

Rethinking equity after Alibaba

There may be a place for differential voting shares

The idea that voting power should go hand in hand with share ownership has become so entrenched a principle of corporate governance that it is rarely questioned. This week Alibaba, the Chinese internet group, opted to float in the US because the Hong Kong stock exchange would not bend its rules to allow the company’s owners to control the equity, despite owning only a minority of the shares. Most observers sided with the HK authorities while condemning the US for engaging in a regulatory race to the bottom. Read more of this post

China outlined a plan to allow foreign firms to offer some Internet services in the country and ended a more than decade long ban on the sale of videogame consoles

Updated September 27, 2013, 1:22 p.m. ET

China to Open Door Wider for Foreign Tech Firms

PAUL MOZUR

BEIJING—China outlined a plan to allow foreign firms to offer some Internet services in the country and ended a more than decadelong ban on the sale of videogame consoles as part of new rules issued Friday for a free-trade zone in Shanghai. According to a statement from the State Council, foreign companies operating within the trade zone will be able to offer so-far unspecified information technology services, including Internet, software, data processing and storage services. The Ministry of Industry and Information Technology is expected to release more specific guidelines in the coming months, according to lawyers. Read more of this post

Auction houses in China: Christie’s v the people’s army; Foreign auctioneers have begun to enter China’s huge but unruly art market. They will not find it easy

Auction houses in China: Christie’s v the people’s army; Foreign auctioneers have begun to enter China’s huge but unruly art market. They will not find it easy

Sep 28th 2013 | SHANGHAI |From the print edition

IN 1779 the estate of Sir Robert Walpole, Britain’s first prime minister, sold an art collection to Catherine the Great. The private sale, which included pieces by Rubens and Rembrandt, was brokered by James Christie, a pioneering auctioneer. Though she placed most of these in St Petersburg’s Hermitage museum, the Russian empress traded a few items with the Qianlong emperor for some Chinese masterpieces. Read more of this post

Heineken sewn up in Chinese trademark tangle

September 27, 2013 3:11 pm

Heineken sewn up in Chinese trademark tangle

By Demetri Sevastopulo in Hong Kong

China became the world’s copycatting centre by faking everything from Louis Vuitton bags and PhD diplomas to Apple stores. Now Heineken has become the latest multinational to face an intellectual property challenge – from a tiny Chinese sewing machine company. The global brewer has accused Wujiang Xili Machinery Factory, a company from Jiangsu province with fewer than 50 employees, of pirating its name and logo, and using them at a Shanghai trade show this week. Read more of this post

China to allow banks to sell $49 billion of asset-backed securities: sources

China to allow banks to sell $49 billion of asset-backed securities: sources

Fri, Sep 27 2013

BEIJING (Reuters) – China will allow selected banks to issue asset-back securities (ABS) worth 300 billion yuan ($49 billion) by the end of June next year, expanding a pilot program to support the economy, three industry sources said. The People’s Bank of China (PBOC) asked 20 banks, including big state banks, to submit their ABS issuance plans at a recent meeting which also involved securities brokerages and trust companies, the sources familiar with the development said. Read more of this post

China private bank push sparks speculative stock frenzy

China private bank push sparks speculative stock frenzy

Fri, Sep 27 2013

* Policymakers express support for privately-owned banks

* Speculators feast on stocks linked to private banks

* Hope that private banks can boost financing to small firms

* But officials, bankers say no panacea for SME financing woes

By Heng Xie and Gabriel Wildau

SHANGHAI, Sept 26 (Reuters) – Signs that China is preparing to open its banking sector to privately-owned lenders has raised hopes that they can help ease financing difficulties afflicting smaller firms. A handful of listed companies have also seen their stock prices soar in recent weeks on rumours they are planning moves into banking. But bankers and policymakers say that hopes for private banks have been inflated. At least in the short term, private banks will provide neither big new profits to listed companies nor an easy solution to small- and medium-sized enterprises’ (SMEs) financing woes. Read more of this post

Norway’s innovators help oil industry move to harsher climes

Norway’s innovators help oil industry move to harsher climes

Fri, Sep 27 2013

* Subsidies, rebates, tax breaks fuel innovation

* Norway may lead in automation, Arctic, subsea technology

* Statoil seen driver behind innovation

By Balazs Koranyi and Stephen Eisenhammer

OSLO/ABERDEEN, Scotland, Sept 27 (Reuters) – A drillship that cuts through two metres of ice, radar that detects oil spills in Arctic darkness and a drill that burrows through rock like a mole are among Norwegian innovations helping the oil industry as it moves into harsher climes. Small companies in Norway, backed by tax subsidies, a home-grown oil major and an abundance of experienced engineers, are bringing in technology that is leading the oil and gas industry in Arctic exploration and subsea production. “This is an incredibly conservative industry, and it takes 10 years to adopt and commercialize new technology,” said Stig Hognestad, the chief executive of small technology firm Ziebel. “Nobody wants to be the first because it’s risky … and Norway’s the exception.” Read more of this post

Korean cancer patient to save family from medical costs kills himself; The Park administration had earlier promised to fully cover medical expenses for four terminal diseases including cancer

2013-09-27 16:55

Cancer patient to save family from medical costs kills himself

By Chung Hyun-chae
A 71-year-old man suffering with cancer took his own life in the port city of Busan on Thursday, apparently to relieve his family of financial pressure, police said Friday. The man surnamed Kim was diagnosed with liver cancer earlier this month, and was scheduled to undergo surgery on Saturday. He was to enter hospital on Friday. Kim’s son, 38, discovered the body of his father who hanged himself from a gas pipe in his studio apartment. A suicide note was found taped to the victim’s chest. “Please forgive me. If I undergo a surgery, it would pose a financial burden on all of you. Even though it is a pittance, please keep the 130,000 won in my purse and what’s left in my bank account,” the note read. “It appears he took his own life in order to not impose a financial burden on his children,” said a police officer. Kim lost his wife about 10 years ago and lived alone. Along with his son he leaves behind a 40 year old daughter. Read more of this post

Park eats her words. Can, and will, South Korea’s president make more just, equal society?

2013-09-26 16:59

Park eats her words

Can, and will, president make more just, equal society?        
President Park Geun-hye Thursday expressed regrets about her failure to fully deliver campaign promises on key social welfare programs. “I will try my best to realize these pledges during my term of office,” Park said while presiding over a Cabinet meeting.
Koreans can neither understand why President Park is backtracking on the most important election pledges nor accept the way she is doing so. Park cited the slower-than-expected economic recovery and consequent hole in government revenue as the main reason. This means that she won the election on a pledge that can change by the fluctuations in the business cycle. Read more of this post

A Seoul appeals court handed down severe verdicts to the brothers who run SK Group, the country’s third-largest conglomerate

Appeals court jails 2 SK brothers

Tougher than original verdict, judges also shoot down new trials

Sept 28,2013

A Seoul appeals court yesterday handed down severe verdicts to the brothers who run SK Group, the country’s third-largest conglomerate.

Chairman Chey Tae-won was sentenced to four years in prison, and his younger brother, Chey Jae-won, SK’s vice chairman, was sentenced to three-and-a-half years.
The Seoul High Court yesterday upheld the four-year verdict given to the 52-year-old chairman by a lower court back in January for embezzling 45.1 billion won ($41.8 million) from two SK affiliates for personal investments.  Read more of this post

Hyosung, CJ E&M in tax hole; Cho Suck-rae, chairman of the country’s 26th largest conglomerate Hyosung Group, is likely to be prosecuted for evading hundreds of billions of won in tax

2013-09-27 17:00

Hyosung, CJ E&M in tax hole

By Na Jeong-ju
Cho Suck-rae, chairman of the country’s 26th largest conglomerate Hyosung Group, is likely to be prosecuted for evading hundreds of billions of won in tax.
Sources from the National Tax Service (NTS) said Friday it discovered Cho allegedly dodged paying tax by manipulating account books and setting up a slush fund.
“The case may be referred to the prosecution as early as next week,” an NTS official said on condition of anonymity. Read more of this post

The fate of the troubled Tongyang Group has been left to the market and its chances of getting back on its feet by itself are looking increasingly slim

2013-09-27 17:23

Fate of Tongyang tossed to market

By Kim Rahn
The fate of the troubled Tongyang Group has been left to the market and its chances of getting back on its feet by itself are looking increasingly slim. No fresh credit line is forthcoming with government regulators telling it to expect no help. The core of its problems is corporate bills and bonds it and its affiliates issued to keep afloat because banks turned its loan requests down. Tongyang International and Tongyang Leisure need fresh funds to repay maturing debts or face bankruptcy. Read more of this post

Beer, gambling and Mad Men lead stocks boom

September 27, 2013 3:25 pm

Beer, gambling and Mad Men lead stocks boom

By FT Reporters

When it comes to big stock market gains, investors should look to beer, gambling, the macho culture of Mad Men and box office hits such as The Hunger Games. While many have opted for safety as equities have rallied in the wake of the financial crisis – favouring big, reliable dividend-payers – an eclectic group of global small-caps are setting a blistering pace. The MSCI World Small Caps index has climbed almost 22 per cent already this year, touching a record high last week, thanks largely to growing confidence in the strength of the US economic recovery and hopes for growth in Europe and Japan. Meanwhile, the blue-chip World Index has lagged behind, gaining 16 per cent in 2013. Read more of this post

On the march, small-caps that punch above their weight

September 27, 2013 6:48 pm

On the march, small-caps that punch above their weight

By Jonathan Eley

SmallCap

Small is beautiful. Elephants don’t gallop. A flea can jump 200 times its own height. There’s no shortage of appropriate metaphors for the tendency of small-cap shares to outperform their larger brethren – and in recent years, no shortage of examples of them doing so. Shares in companies outside the top echelon of the market have been on a tear this year. The FTSE Fledgling index is up 27 per cent this year to date, while the FTSE Small-cap is up 25 per cent and the Numis Smaller Companies index has risen 21 per cent – more if the investment trusts are stripped out. That compares with a gain of 11 per cent for the FTSE 100, which tracks the biggest companies. Read more of this post

Byron Wien is Wary of Market’s Optimism; Be defensive “when most others think almost everything is headed in the right direction”

SATURDAY, SEPTEMBER 28, 2013

Byron Wien is Wary of Market’s Optimism

By BYRON WIEN | MORE ARTICLES BY AUTHOR

Be defensive “when most others think almost everything is headed in the right direction,” writes the veteran Wall Street strategist.

We all had plenty to brood about over the Labor Day weekend. President Obama was contemplating sending missiles into Syria to punish President Bashar al Assad for using chemical weapons against his own people and to discourage him from using them again. The President also had to choose a successor to Federal Reserve Chairman Ben Bernanke and his preferred choice, Larry Summers, faced opposition in the Senate, threatening his confirmation. The Federal Reserve, by the way, had indicated in May that it might reduce its $85 billion bond-buying program in the fall, causing interest rates to rise and creating turbulence in the emerging markets. Everyone awaited the Fed’s decision on how much restraint they would implement. The nation’s debt ceiling loomed in October with the Republicans taking the position that unless the Affordable Care Act was deprived of funding, they would not agree to raising the borrowing limit. Finally, as if the political situation in the Middle East were not complicated enough, Iran proceeded with its nuclear weapons development program. Read more of this post

Berkshire’s Benjamin Moore Seeks Third Chief in Two Years

Berkshire’s Benjamin Moore Seeks Third Chief in Two Years

By Zachary Tracer – Sep 28, 2013

Benjamin Moore, the paint maker owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), said Chief Executive Officer Robert Merritt left the company. Benjamin Moore, which hired Merritt last year, is searching for a new leader and expects to name a replacement “in the coming week,” the Montvale, New Jersey-based company said yesterday in a statement on its website. The paint company last year hired Merritt, a former executive at restaurant companies including Cosi Inc., to replace Denis Abrams. The unit has staff of about 2,200 people, according to the most recent annual report from Omaha, Nebraska-based Berkshire. Buffett, 83, agreed in 2000 to buy the paint company for about $1 billion as he expanded housing-related operations. He has identified the business as one of four Berkshire units that counts Tracy Britt as chairman. Another of the units, building products provider Johns Manville, in November named Mary Rhinehart as chief executive officer, replacing Todd Raba. Britt didn’t immediately return a message seeking comment. Eileen McComb, a spokeswoman for Benjamin Moore, also didn’t return a call.

To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net

New York City Opera Plans for Bankruptcy After Years of Bungling

City Opera Plans for Bankruptcy After Years of Bungling

New York City Opera said today that it plans to file for bankruptcy next week after years of board missteps and an emergency fundraising appeal that flopped, according to the New York Times. The move marks the end of the 70-year-old company, once dubbed “the people’s opera” by Mayor Fiorello LaGuardia and a breeding ground for young talent that included Beverly Sills and Placido Domingo. Read more of this post

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