I was borrowing money from 30 leading banks. How could they all
be so wrong? I’m only a simple businessman.
Sir Freddie Laker. The Laker Airways bankruptcy.
Did fired Tata Chairman Cyrus Mistry get it
wrong when he said Tata Group’s net worth of USD 26 billion might be impaired
by as much as USD 18 billion? Bloomberg
suggests it might depend on whether he wants to see his 18.4% stake in Tata
Sons Ltd sold on to other investors. It’s a funny old world in high finance.
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
A Tata-Mistry Divorce May Cost $16 Billion
By Andy
Mukherjee Oct 28, 2016 2:25 AM EDT
This
week's acrimonious separation between the chairman of Tata Group and its
majority owners may now be heading for a divorce. Ratan Tata, who returned to
head the conglomerate after ousting Cyrus Mistry, is looking for a partner to
buy the ex-chairman's stake, Bloomberg News reported Thursday.
Should
Mistry agree to sell, how much can he hope to get for his family's 18.4
percent of Tata Sons Ltd.?
India's
Tata Group, which saw a boardroom coup this week, might look for a friendly
buyer for ousted chairman Cyrus Mistry's 18.4 percent stake
Bear in
mind that following his dismissal, Mistry raised some very serious allegations
about both the holding company and several of its biggest publicly traded
units. In hitting back at the board that fired him, Mistry said the
group's net worth of $26 billion could be impaired by as much as $18 billion --
shrinking to just $8 billion -- should writedowns be needed at businesses like
Tata Steel Ltd.'s European operations; Tata Motors Ltd.'s passenger car
business (ex-Jaguar Land Rover, the jewel in the empire's crown); Indian Hotels
Co.'s overseas Taj properties; one of Tata Power Ltd.'s plants; and a floundering
wireless telecom venture with NTT Docomo Inc.
As a
seller, Mistry is unlikely to behave anything like a spurned chairman trying to
score debating points. To maximize value, he might say he overestimated
the risk of Armageddon. He might even admit the possibility that Ratan Tata's
return to a conglomerate he chaired for two decades will reinvigorate the
operating companies.
Maybe Tata can't repeat a near sevenfold increase in book value over the period 2004-2012, but if global steel demand stabilizes, there's a fair chance the group's assets could reach a book value of $28 billion after a year. In the base-case scenario, the coffee-to-cars-to-software conglomerate won't be any worse off, and its assets would be worth in 2017 what they are today: $26 billion.
Not That Pricey
Now suppose that status quo has a likelihood of 50 percent, while the probability of a massive writedown is 20 percent, and that of an improvement is 30 percent. That gives a one-year-forward book value of $23 billion. Considering that General Electric Co. trades at three times its estimated book value for next year, and companies in the more diversified Tata Group sell at 4.8 times, Mistry could perhaps ask for a halfway-house multiple of 3.75 times, valuing his 18.4 percent stake at a little under $16 billion.
Only a patient investor who cares more about growth than current income would be willing to write that check. After all, the dividend received from operating companies yielded just 1.6 percent on Tata Sons' investment last year, according to the Economic Times. An investor who paid a multiple of 3.75 to relieve Mistry of his stake would earn a divided yield of 0.4 percent.
More
In
under reported China news this week, American “bullying” in South East Asia is
pushing yet more Asian governments towards China. President Xi became a “core”
leader, similar to Mao. America’s next President needs to tread softly.
“China is a sleeping giant. Let her sleep, for when she wakes
she will move the world.”
Napoleon.
China's Xi anointed 'core' leader, on par with Mao, Deng
China's
Communist Party gave President Xi Jinping the title of "core" leader
on Thursday, putting him on par with past strongmen like Mao Zedong and Deng
Xiaoping, but it signaled his power would not be absolute.
A lengthy
communique released by the party following a four-day, closed-door meeting of
senior officials in Beijing stressed maintaining the importance of collective
leadership.
The
collective leadership system "must always be followed and should not be
violated by any organization or individual under any circumstance or for any
reason", it said.
But all
party members should "closely unite around the Central Committee with
Comrade Xi Jinping as the core", said the document, released through state
media.
The
"core" leader title marks a significant strengthening of Xi's
position ahead of a key party congress next year, at which a new Standing
Committee, the pinnacle of power in China, will be constituted.
Since
assuming office almost four years ago, Xi has rapidly consolidated power,
including heading a group leading economic reform and appointing himself
commander-in-chief of the military, though as head of the Central Military
Commission he already controls the armed forces.
More
Sri Lanka to sell 80 percent of southern Hambantota port to Chinese firm
Sri Lanka
will sell to a Chinese company 80 percent of a $1.5-billion port in its south,
where China has also been offered an investment zone, in a bid to cut the
country's debt burden, Finance Minister Ravi Karunanayake said.
The move
follows an offer made by Prime Minister Ranil Wickremesinghe during a visit to
China in April, to swap equity in Sri Lankan infrastructure projects against
some of the $8 billion in debt the Indian Ocean island owes to China.
The
Hambantota port was built with the help of Chinese loans and contractors in
2010 under former leader Mahinda Rajapaksa, as part of efforts to boost
development of infrastructure after the conclusion of a 26-year-long civil war
in 2009.
But the
port, and a nearby airport, also Chinese-financed, had been seen as a white
elephant because it was not financially viable, the current government has
said.
"For
somebody like the Chinese, it is the silk route transit point,"
Karunanayake told a meeting of the country's Foreign Correspondents Association
late on Thursday.
China's
interest in the port is seen as part of its ambitions to build a "Maritime
Silk Route" to the oil-rich Middle East and onwards to Europe.
That
makes some countries, including India and the United States, nervous, with Sri
Lanka sitting near shipping lanes through which much of the world's trade
passes en route to China and Japan.
More
Malaysia to buy navy vessels from China in blow to U.S.
Malaysia
will sign a contract to purchase Littoral Mission Ships from China when Prime
Minister Najib Razak visits Beijing next week, according to a Facebook posting
by the country's Ministry of Defence.
The text
of a speech to be delivered by Malaysian defense minister Hishammuddin Hussein
was posted on Facebook on Tuesday, but was later removed after Reuters asked a
defense ministry spokesman for comment.
The
purchase of the patrol vessels, if it proceeds, would be Malaysia's first
significant defense deal with China and comes amid rising tensions in the South
China Sea and as the United States and China compete for influence in the
region.
China's foreign ministry spokesman Lu Kang said on Friday
he was "unclear on the specifics of the situation". But responding to
a Reuters question at the daily ministry briefing he noted China and Malaysia
"continue to cooperate and communicate regularly across all spheres".
Malaysia's
ties with the United States became strained after the Department of Justice
filed lawsuits linked to a money-laundering investigation at state fund
1Malaysia Development Berhad (1MDB), which Najib founded and had overseen as
chairman of its advisory council.
Najib is
traveling to China on Sunday for a week-long visit.
"On
November 5, 2016, the Defence Ministry will sign a contract for the procurement
of Littoral Mission Ships (LMS) with SASTIND (the State Administration for
Science, Technology and Industry for National Defense), which is an important
part of the schedule during the Prime Minister's official visit to China,"
the Facebook post quotes Hishammuddin saying.
However,
a video recording of the speech at the Malaysian defense ministry by
Hishammuddin does not mention this contract.
A defense
ministry spokesman declined to comment and the prime minister's office did not
immediately respond to requests for comment.
Littoral
Mission Ships are fast patrol vessels that can be equipped with a helicopter
flight deck and carry missiles. They are primarily used for coastal security,
maritime patrol and surveillance, but can also be deployed for disaster relief
and search and rescue operations.
China
claims most of the South China Sea as its territory. But Brunei, Malaysia, the
Philippines, Taiwan and Vietnam also have rival claims to parts of the
waterway, which commands strategic sea lanes which carry some $5 trillion worth
of trade a year.
Ties
between Malaysia and China reached a new peak in December when China came to
Najib's rescue with a $2.3 billion deal to buy assets of scandal-hit state fund
1MDB, helping ease Najib's concern over the firm's mounting debt.
Najib is
traveling with dozens of government leaders and business people to China. In a
statement on Wednesday, he said Malaysia was committed to strengthening
friendship with China and pushing ties to "new highs".
More
Philippines says China vessels have left Scarborough Shoal
Chinese
ships are no longer at the disputed Scarborough Shoal in the South China Sea
and Philippine boats can resume fishing, the Philippine defense minister said
on Friday, calling the Chinese departure a "welcome development".
Philippine
fishermen could access the shoal unimpeded for the first time in four years,
Defence Secretary Delfin Lorenzana said, capping off a startling turnaround in
ties since his country rattled China in 2013 by challenging its maritime claims
at an international tribunal.
The departure
of the Chinese coastguard comes after President Rodrigo Duterte's high-profile
visit to Beijing and follows his repeated requests for China to end its
blockade of the shoal, a tranquil lagoon rich in fish stocks.
"Since
three days ago there are no longer Chinese ships, coastguard or navy, in the
Scarborough area," Lorenzana told reporters.
"If the Chinese ships have left then it means our fishermen can resume
fishing in the area."
Though
the Scarborough Shoal is comprised of only a few rocks poking above the sea
some 124 nautical miles off the Philippine mainland, it is symbolic of the
country's efforts to assert its maritime sovereignty claims.
Lorenzana
did not explain the circumstances of the Chinese vessels leaving the shoal,
which was the centerpiece of a case Manila filed in 2013 at the Permanent Court
of Arbitration in the Hague.
Asked on
Friday about the return of Philippine fishermen to the shoal, China's Foreign
Ministry spokesman Lu Kang made no mention of a coastguard withdrawal.
The two
countries "were able to work together on issues regarding the South China
Sea and appropriately resolve disputes," Lu told a regular briefing.
The Hague
court in July declared that despite the Scarborough Shoal being located within
the Philippines' 200 nautical mile exclusive economic zone, no one country had
sovereign rights to it, so that all claimants may fish there.
China has
refused to recognize the case or the award, which also invalidated the
nine-dash line on Chinese maps denoting its claims to most of the South China
Sea.
China
seized Scarborough Shoal - claimed by Beijing as Huangyan island and by Manila
as Panatag - in 2012.
The
previous administration's pursuit of the case infuriated China, but it appears
to have changed its stance since Duterte took office and started praising
Beijing, often in the same sentences as his perplexing verbal attacks on
longtime ally the United States.
Reuters
exclusively reported on the eve of Duterte's visit to China that Beijing would
consider granting Philippine fishermen conditional access to the shoal.
More
Australia’s largest private trade delegation to visit China
More than 200 delegates will be on the visit to Shanghai aimed
at building on the A$160 billion trade relationship between Australia and China
October 29, 2016
SYDNEY:
Australia’s largest ever private trade delegation was due to arrive in China on
Sunday.
More than
200 delegates, including Queensland state ministers, agricultural producers and
exporters will be on the visit to Shanghai aimed at building on the A$160
billion (Dh441 billion; $120 billion) trade relationship between Australia and
China.
“We have
brought together businesses from banks to exporters and freight companies,” Ben
Lyons, the group’s leader, said in a statement.
Among the
high profile members of the “AccessChina” delegation are Qantas Airways Ltd and
both National Australia Bank and Australia and New Zealand Bank’s agri-business
units.
Qantas
Freight, which is looking to expand capacity in Asia, is hosting a networking
dinner that Lyons said would help “educate the Shanghai business community on
our regional capability when combined with an international freight provider”.
The group
left from Wellcamp Airport, a new A$200 million privately built air freight
facility in Queensland, which will begin weekly freight-only flights next
month. Cathay Pacific will operate the service from Wellcamp and Hong Kong.
Australia
has been pushing to become the “delicatessen of Asia”, tapping its favourable
climate to send crates of produce such as figs and edible flowers to store
shelves across the increasingly affluent region.
But
finding space on flights has proven a headache for some Australian producers,
who say freight export capabilities are not keeping up with growing demand for
products from Asia’s middle class.
More
“They couldn't hit an elephant at this distance."
Union General John Sedgwick just before he was shot dead. May
1864.
We close for the week with Jason in
California musing on the effect of October’s falling US auto sales on the presidential
election, although this morning candidate Clinton seems to have a bigger
problem with the FBI and emails again. The next few days look interesting.
U.S. October Auto
Sales Forecast By JD Power to Materially Decline Y.O.Y, With Potential Election Impacts
N. Jason Jencka October 28th, 2016
8:15 pm ET
The automotive industry in the U.S.
is one that occupies a cultural space greater than beyond its certainly broad
macro-economic impact. From the politically charged debates of 2008-2009 over
the Federal bailouts of General Motors and Chrysler to the constant and
combative lobbying surrounding fuel economy targets, the auto industry is
uniquely politicized. In the 2016 Presidential race, the Trump campaign has
repeatedly chastised Ford for planning to end passenger car production in the
U.S. (largely in favor of Mexico) and used this move as evidence of a broken
trade framework.
This set of circumstances adds
particular importance to developments within the auto industry leading up to
the November 8th election. It happens that October auto industry
sales figures are expected to drop ~7% from the record levels of 2015. Should
this forecast be realized in the coming days, the Clinton campaign may face difficulties in
promoting the automotive recovery as an example of an Obama-era success to be
built upon by electing their candidate. This dynamic is of particular impact in
the industrial “rust belt” states of Ohio and Michigan. Ohio has historically
been an electoral bellwether as no Presidential candidate has been elected
without winning the state since John F. Kennedy defeated Richard Nixon in 1960.
The 2016 outcome is, of course, yet to be determined but the relationship
between the auto industry and politics is one that is certainly worth watching.
Sources:
Fortune, Reuters http://fortune.com/2016/10/21/auto-sales-october-jd-power/
The American
Presidency Project, The University of California-Santa
Barbara http://www.presidency.ucsb.edu/showelection.php?year=1960
N. Jason Jencka is presently studying Finance and
Economics at Sierra Nevada College, located near the shores of Lake Tahoe on
the border of California and Nevada.His interests include the interplay between
world markets and the global political sphere, with a focus on developments of
both sides of the Atlantic in North America and Europe.In his leisure time he
enjoys connecting with those people that have an interesting story to tell and
a genuine desire to make an impact in the world.
Clinton Urges FBI to Swiftly Explain Fresh Probe of E-Mails
October
28, 2016 — 6:15 PM BST Updated on October 29, 2016 — 3:27 AM BST
Hillary
Clinton demanded that the FBI immediately explain its decision to reopen
an investigation into her use of private e-mails as secretary of state and said
she’s confident that the renewed inquiry will show no wrongdoing.
“The
American people deserve to get full and complete facts,” Clinton told reporters
in Des Moines, Iowa, hours after her presidential campaign was rocked by a
letter from FBI Director James Comey telling lawmakers of the revived inquiry.
“If they’re going to be sending this kind of letter that is only going
originally to Republican members of the House, they need to share whatever
facts they have with the American people.”
The
politically explosive development came less than two weeks before the presidential
election, providing a boost to Republican nominee Donald Trump as most national
polls showed him lagging behind. Comey said he can’t say how long the review
would take -- raising the possibility that Clinton could go into Election Day
with the new probe unresolved and still hanging over her campaign.
The
Federal Bureau of Investigation acted after investigators unearthed new e-mails
through a separate probe of Clinton aide Huma Abedin’s estranged husband,
former Representative Anthony Weiner. The bureau is probing illicit messages
that Weiner allegedly sent to a 15-year-old girl in North Carolina.
That
inquiry gave it access to a computer believed to have been used by both Weiner
and Abedin, according a U.S. official who asked not to be identified discussing
a pending investigation. Now the FBI is looking into whether Abedin’s e-mails
are work-related and whether they contain classified information.
The more
than 1,000 e-mails included exchanges between Abedin and Clinton, the
Washington Post reported, citing a law enforcement official it didn’t identify.
More
I am not a crook.
President Nixon. November 17th 1973.
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