At first, it was just multinational drugmaker GlaxoSmithKline that allegedly paid bribes in China, including “sexual bribes,” to “government officials, medical associations, hospitals and doctors,” by using travel agencies as conduit. For a total of $489 million. Now more big drugmakers are on the hot seat for the same crimes in China – and in the US.
Contributed by Don Quijones, Spain: BBC's article about the political funding scandal gripping Spain featured a photo of hapless leader Mariano Rajoy licking his lips like a "dirty old man." It spread like wildfire across the social media, setting off a cacophony of calls for Rajoy to resign for the irreparable damage he’d done to Spain’s overseas image.
Contributed by Chriss Street: The Canadian Royal Mounties now believe that the runaway oil train that killed 15 people and left 35 missing in a Quebec town may have been an act of criminal negligence for failing to set the brakes. But the real criminal negligence is that oil from booming production in North Dakota is shipped by trains due to lack of pipelines.
Unlike mortgage equity withdrawal by households, where the cash windfall was distributed across the middle class, corporate equity withdrawal through buybacks, buyouts, and takeovers resulted in cash distributions to the very top of the economic ladder. Financial engineering: the ATM of the prosperous classes!
Contributed by John Mauldin: Investors seek that elusive substance called alpha. It’s found on the edges, away from common knowledge, but too often remains hidden. Instead they find beta, or simply what the market gives everyone. In bull markets, that can be plenty and investors feel secure. But in the secular bear cycles investing is a difficult task.
The asset bubbles the Fed’s money-printing and bond-buying binge has created are spectacular, the risk-taking on Wall Street with other people’s money a sight to behold. Big winners were mortgage Real Estate Investment Trusts – and those who got fat on extracting fees. But now the pendulum is swinging back, and the bloodletting has started.
Voestalpine, an Austrian steelmaker with 46,000 employees, saw its revenues decline by 4% last year. It blamed the “cooling down of the global economy,” and “dwindling momentum in Asia (especially China).” Now it’s under pressure to cut costs. Hence offshoring to cheap countries! China or Indonesia? Nope.
The financial crisis was brutal for Germany, but the recovery steep, and in 2011, the gloating started. They called it the German “success recipe,” a superior system that would keep the economy growing even amidst Eurozone debt-crisis mayhem. That optimism has endured, and stocks have hit new highs, but the economy has diverged sharply.
“The Fed should have been embarrassed by the M&A frenzy,” writes David Stockman. Tyco CEO Dennis Kozlowski, Wall Street’s favorite deal maker, put “the rest of the corporate deal junkies to shame.” But “the poster boy for Greenspan’s first stock market bubble and its sudden, violent demise was a wake-up call that was wholly ignored.”
In most countries, it would be an act of mind-bending chutzpah, or perhaps a display of political insanity, but in Italy it barely made ripples: for a government official, a minister no less, to declare that the country cannot pay its long overdue bills, and not for a month or two, but for the rest of this year! Due to "technical" problems.
Contributed by Jen Alic of Oilprice.com: The situation in Egypt has not been tenable since the Muslim Brotherhood and President Morsi took over, post-revolution, but now that the military has stepped in, ousted Morsi, and placed him in detention, foreign investors are celebrating – on the logic that things couldn’t get any worse, only better.
Contributed by John Mauldin, of Mauldin Economics: The Narrative of Gold is still significant, but mostly in contrast to the narrative that has assumed primacy today: the Narrative of Central Banker Omnipotence. Like all effective narratives, this one is simple: central bank policy will determine market outcomes.
By Farah Halime, Cairo: “Let us savour the moment now and worry about the future later,” some Egyptians said after the military had ousted President Morsi. But as the jubilant atmosphere of Tahrir Square fades, there is one certainty: Egypt’s economy must be made an absolute priority, or risk repeating this scenario in another 12 months.
“The Wall Street coddling monetary régime” that Greenspan institutionalized “deeply transformed M&A,” writes David Stockman. It turned a corporate business strategy into "an all-encompassing mechanism for speculative finance” that executives used to build "empires with apparent, if unsustainable, earnings growth" that ended in "spectacular crash landings."
Contributed by Don Quijones: The first four items the G-8 dealt with was the need for governments to share information to “fight the scourge of tax evasion.” If only their primary targets were multinationals, banks, and hedge funds that pay a pitiful fraction of the taxes they owe in the countries they operate. But they’re going after the little guy.
Tapering bond purchases gets real. New York Fed President William Dudley has spoken. He represents Goldman, where he was a managing director. Goldman owns part of the NY Fed and is one of its 21 “primary dealers.” But it doesn’t want the financial system to blow up. On the theory that you can milk a cow many times, but you can bleed it only once.
Chancellor Merkel’s coalition is likely to emerge victoriously from the elections in September, unless a major debacle blows up. So no debacle is allowed to occur until after the election. But just then, new revelations about NSA spying blew up: turns out, all citizens anywhere can be under surveillance by any government, including their own, beyond control and oversight.
"One of the great ironies of the Greenspan bubbles" was that his free market convictions enabled the Fed to drift "irreversibly into its eventual submission to the Cramerite intimidation," wrote David Stockman. It turned "a blind eye to lunatic speculations in the stock market, dismissing them as the exuberances of capitalist boys and girls playing too hard.
A technology that surreptitiously captures data of people out on the street, combines it with other data, and mines it ad infinitum? Local and federal government agencies love it. It’s increasingly sophisticated and cheap. It’s spreading. And it led a professor at West Point to warn: “We don’t have a police state in this country, but we have the technology.”
Ghost island: Hashima, a speck of land, used to be a coal mine where 5,000 people lived and toiled. But in the 1970s, it was abandoned and the concrete structures left to decay, only to resurface in the last James Bond movie. Now Google captured it for Street View – and made an awesome brief video of this eerie industrial wasteland.