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| | April 4, 2016 | |
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| | If you used Panamanian law firm Mossack Fonseca to sock away your wealth overseas, you have a problem on your hands this morning. Eleven million documents from the firm have leaked, and are now being scoured by journalists all over the world. The sheer scale of the leak is unprecedented.
The first round of media coverage is focusing on politicians who moved money out of their countries - including some $2 billion by close associates of Vladimir Putin. But this journalistic orgy is likely to last for months, and some big banks and companies are certain to get caught in its wake. It's a little early to be predicting, but I'd guess it will become a major impetus for reforming the global tax and finance system.
Separately, the Washington Post published Saturday a long and fascinating interview with Donald Trump that provides the clearest look yet into his thinking about economic policy. It's a jumble of Trumpian audacity, economic illiteracy, and peculiar logic. Some of the takeaways:
-Trump believes that easy money has created a bubble that leaves the U.S. on the verge of a "massive recession."
-He says that the "real" unemployment rate is not 5 percent, but in "the twenties," and that the U.S. pays the "highest taxes in the world" - showing either an ignorance of, or contempt for, official statistics.
-He promises a tax cut, yet claims he can eliminate the national debt in eight years, suggesting a monumental lack of understanding of basic public finance.
-He says he's going to do that by renegotiating trade agreements and cutting trade deficits - exhibiting not only remarkable hubris about his deal-making abilities, but also confusion about the connection between trade deficits and budget deficits.
You can read the entire transcript of the interview here.
More news below.
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| | Top News | |
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| | • Alaska Wins Virgin America Alaska Air Group is set to become the U.S.'s fifth-largest carrier after edging out JetBlue Airways in the auction for Virgin America. JetBlue threw in the towel with the bidding at $2.6 billion--around $1 billion more than the stock market thought the airline was worth at the end of last week. The premium says a lot about the state of an industry which is churning out cash against a background of low fuel prices and solid domestic demand. Alaska stands to gain a big boost to its presence in Los Angeles and San Francisco, assuming it gets antitrust clearance. WSJ (subscription required) • Blackstone Raises Its Bet on Outsourcing Blackstone Group is buying Indian IT outsourcing services provider MphasiS from Hewlett Packard Enterprise, in a deal that could cost the U.S. asset manager up to $1.1 billion. The deal will be Blackstone's biggest in the $150 billion Indian outsourcing industry. It underscores its bullish outlook on a sector that is profiting from a trend among western clients (especially in the financial services industry) to send more IT jobs to countries such as India to cut costs. In December, Blackstone announced the purchase of a minority stake in India's IBS Software for $170 million. Fortune • E.U. Deports First Migrants Back to Turkey The European Union has begun deporting people back to Turkey under its controversial deal with President Recep Tayyip Erdogan in its bid to stem an unmanageable inflow of migrants. The E.U.'s border service Frontex said most of the 136 people shipped back to Turkey from Greece Monday were from Pakistan. Under the deal, the E.U. has to accept one Syrian refugee currently in Turkey for each illegal immigrant it sends back. None of those deported Monday was directly fleeing the Syrian conflict. There had been violent resistance at the end of last week among those selected, but Monday's deportation passed off peacefully. BBC • Apple's Plans for India Provoke Backlash Apple's plans to break into the Indian smartphone market by selling used phones has sparked an angry backlash from locals who protest that it would turn their country into a dumping ground (as well as undercut their own flourishing businesses). With the Chinese market fast approaching saturation, Apple badly needs to grow in the world's other emerging economic superpower. Trouble is, its products are too expensive: it has less than 2 percent of an Indian market in which four-fifths of phones cost less than $150. Branded smartphones sell for as little as $35. Nor will importing used phones sit well with Prime Minister Narendra Modi, who is trying to encourage local manufacture of the modern world's indispensable gadget. Bloomberg | |
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| | Around the Water Cooler | |
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| | • Parts Shortage May Hit Oculus Rift Shipments It's a problem as old as the manufacturing sector itself. Facebook is struggling to source parts for the new Oculus Rift virtual reality headsets launched with such fanfare last week. The company said an "unexpected component shortage" would lead to some delays in shipping the $599 headsets, although it didn't specify which parts are the source of the problem, or how widespread and how long the delays would be. The damage is likely to be more to Facebook's pride than to its finances: sales of VR headsets were only likely to account for around 1% of group revenue this year, according to analysts. WSJ (subscription required) • France's Biggest Telecoms Merger Collapses A merger between two of France's biggest telecoms operators has collapsed at the last minute, leaving big question marks over the fate of some of the country's largest companies. Orange (the former France Telecom, in which the French state is still the biggest shareholder) had hoped to buy Bouygues Telecom, hoping that the consolidation would end long-running pressure on margins. The deal would have reduced the number of big players to three from four. Bouygues, widely seen as the weakest of the big four, is the biggest loser, its shares down 17% as it faces life on its own. Needless to say, everyone is blaming everyone but themselves for the fiasco. Financial Times • Greek Bailout Volcano Rumbles Again Is Greece going to erupt, or is it just belching smoke again? The International Monetary Fund, the Eurozone and the Greek government are at each other's throats again after Wikileaks published the transcript of an IMF conference call in which officials appear to discuss pulling out of the country's bailout in an effort to push the Eurozone into granting it debt relief. IMF head Christine Lagarde clearly thinks the Greeks have been spying on her officials, telling Prime Minister Alexis Tsipras that "it is critical that your authorities ensure an environment that respects the privacy of their internal discussions." Greece's $95 billion bailout is in trouble, with the government struggling yet again to meet its reform obligations and the Eurozone as reluctant as ever to lighten its crippling debt burden. Financial Times • ZTE to Appease U.S. With Management Shakeup Chinese telecom equipment and smartphone maker ZTE Corp will announce a new management team on Tuesday, as part of a deal that will help it escape the imposition of sanctions by the U.S. ZTE's board of directors will meet to approve the new team, and changes will be made public in a stock exchange filing on Tuesday afternoon or evening, ZTE spokesman David Dai Shu told Reuters Monday. Dai said it was a routine and regular move, but ZTE has found itself subject to some of the toughest-ever U.S. government export restrictions for allegedly breaking U.S. sanctions against Iran in 2012. Last month, the U.S. said it would ease those restrictions until the end of June and could further ease them if ZTE cooperated in "resolving the matter." Reuters | |
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