The saga of four Rio Tinto employees detained in China continues without a glimmer of transparency from the Chinese government. Yesterday’s statement from the foreign ministry lacked a certain specificity: The four are being held for allegedly stealing state secrets for a foreign government – actions “which hurt China’s economic interests and economic security,” a foreign ministry spokesman said. There were no other details. One might think this disturbing incident would dampen foreign companies’ appetite for doing business in China. But this and previous unpleasant encounters with China’s arbitrary officialdom never do – foreigners keep coming back for more, factoring such scary episodes into the cost of doing business there. Rio Tinto itself certainly won’t exit China, its biggest customer. Will the mining company shift some employees to locations outside China to avoid similar detentions in future? Quite possibly. In fact, some of Rio’s key negotiators – in iron ore price talks with China – reportedly remained outside China in recent weeks, to ensure their phone calls and emails weren’t intercepted. Look for more companies to quietly shift certain vital personnel off-shore. *** Here’s an analysis by WSJ colleague James Areddy: http://online.wsj.com/article/SB124710009614915527.html. Also an interesting blog about state secrets laws by colleague Sky Canaves: http://blogs.wsj.com/chinajournal/2009/07/09/murky-state-secrets-laws-at-issue-in-rio-tinto-case/
Archive for July 9th, 2009
China, Commodities, Mining Industry, Natural Resources / Comments Off
President Hugo Chavez is vowing to take 154 FM radio stations off the air and threatening to shut down cable-TV providers, reports DJN colleague Darcy Crowe. We shouldn’t be surprised, of course. Chavez has been fighting the private media for many years. Among other things, he has pledged to take Venezuela’s only nationwide private 24-hour news channel off the air. Why? Because it’s critical of the president, Crowe writes. The president’s plan to clobber private radio and TV players comes wrapped in official-sounding rationales: All those radio stations haven’t turned in required broadcasting license renewals. Some of the cable systems have interfered with broadcasts by state-run news channels, including Chavez’s favorite, Telesur, the president alleges. As Crowe writes, “Telesur has become a key public and foreign relations tool for Chavez: the state-run news channel broadcasts throughout the region with a decisive leftist tilt.” Readers of this blog will recall that Chavez has also been cracking down on certain non-media companies and industries for purportedly undermining state-run interests. He’s nothing if not consistent.
Emulex Corp. would have saved a lot of time and money if it had simply taken the “just say no” approach to Broadcom Corp.’s $11 a share offer for the company.
Instead, it dragged out a process for months and paid countless dollars to advisers to ultimately cook up reasons to not tie up with Broadcom.
Emulex shares traded for $6.61 on April 20, the day before Broadcom made a $9.25 offer – a 40% premium. That was rejected. Broadcom came back with an $11 a share offer in late June – a 66% premium to Emulex’ share price on April 20. Today, that was rejected.
Whether the “new” General Motors, due to emerge from Chapter 11 bankruptcy tomorrow, makes cars people want to buy is hard to predict. The economic crisis plus a fast-changing global auto industry add up to major uncertainty. That said, the announcement that Robert A. “Bob” Lutz will stay with GM, foregoing retirement, is a smart public relations move and might even have a substantive impact on the new company. Lutz, age 77, is an innovator and motivator, and his presence should immediately boost confidence in GM’s prospects. Of course, a profitable auto maker requires an entire team of Lutz-caliber leaders – including dull-but-important people such as great engineers who can implement manufacturing best practices, and brilliant supply-chain experts who can squeeze out the maximum possible costs from the myriad materials that go into automobiles. Also vitally important: a disciplined distribution network fit for today’s impatient consumer. With the stodgy Rick Wagoner nearly out the door, CEO Fritz Henderson has made one smart move by keeping Lutz, who worked wonders at Ford Motor Co. and Chrysler Corp. earlier in his career. Henderson had better move fast to attract the industry’s best minds, or Ford, the Koreans and the Japanese will eat GM’s lunch – again. Henderson, with Lutz, whose title has been Vice-Chairman, Global Product Development, will introduce the revamped (much smaller, hopefully solvent) GM tomorrow. Continue reading…
Commodities, Energy, Investing, Wall Street, Washington / Comments Off
The war against speculation in oil trading that is being launched by regulators and politicians in the U.S. and Europe is wrong for a number of reasons.
One is the age-old social justification for trading or speculation: that it adds liquidity to markets. That allows commercial interests to lay off or “hedge” risks inherent in their business. If there were no speculators there would be few people on the other side of trades.
The second problem is definition. Everyone speculates, now and again. How is speculation different from trading? Length of position held?
The dictionary says speculation (definition four) is “engagement in business transactions involving considerable risk, but offering the chance of large gains.”
Isn’t that why anyone participates in any market? To make large gains? And given each investor’s different goals and ability to withstand risk, it would be a msitake to try to define speculation as separate from investing by measuring the degree of risk. Someone with little financial margin for error could be seen as “speculating” even if his investments were in securities considered generally safe.
The frustration of government officials with high and widely swinging oil prices and the astonishment of citizens pulling up to high-priced gasoline pumps is understandable. Oil prices do have a significant impact on the real economy and changes in price aren’t always based on obvious fundamental developments.
Markets do swing away from fundamentals. But trying to tone down markets or limit the characteristics of certain trades will create a lot of unintended consequences. Better to live with the markets’ price setting ability and sometimes stew at the results.