Petrobras CEO Resigns

Reports this morning that Pedro Parente, CEO of Brazilian oil company Petrobras, has resigned have sent shares tumbling by 15%. The company has stated that an interim CEO will be selected today by the Board and that no other senior executives are leaving the company. The resignation comes after Brazil's government announced it would subsidize diesel prices for sixty days…

Business News

Petrobras CEO Resigns

Reports this morning that Pedro Parente, CEO of Brazilian oil company Petrobras, has resigned have sent shares tumbling by 15%. The company has stated that an interim CEO will be selected today by the Board and that no other senior executives are leaving the company. The resignation comes after Brazil's government announced it would subsidize diesel prices for sixty days in order to end a nine-day strike by the country's truck drivers. Petrobras had been pricing diesel fuel under a system that adjusted to international prices, but with global oil prices rising and the Brazilian real…

Berkshire May Be Preparing to Make an Investment in GE

Rumors have been swirling over the previous two days that Berkshire Hathaway may be in negotiations with General Electric that could result in the investment firm making a multi-billion dollar investment in the industrial conglomerate. News has sent shares of General Electric up from a recent low of $12.80 to close at $13.68 today, an increase of 6.9%. That has put little salve on the wounds of longtime GE shareholders, whose investment traded for more than $30 per share as recently as late 2016. Berkshire has invested in distressed situations before, almost always structuring such…

Fairfax’s Prem Watsa Releases His Latest Letter to Shareholders

Prem Watsa, CEO of global insurer Fairfax Financial Holdings, has gained a large following due to his performance in the years since he took over the company that now bears the name Fairfax. At year-end 1985, when Watsa began running Fairfax, its stock traded at C$3.25 compared to C$649.00 today. A C$10,000 investment then would be worth C$2 million today. As with most letters, Watsa reviewed Fairfax's business performance last year along with general thoughts on the current environment. Among the highlights of the letter: Catastrophe losses swung Fairfax to an underwriting loss in its…

Warren Buffett’s Latest Letter Points Towards Succession

Warren Buffett released his widely anticipated letter to shareholders this morning along with Berkshire Hathaway's annual report. Since 1965, when Buffett gained control of a New England textile mill, his letters to shareholders each year have outlined his business philosophy, provided updates on Berkshire Hathaway's performance, and often included Buffett's comments on broader issues in finance and politics. One of the biggest changes at Berkshire Hathaway was not mentioned until the very end of the letter, "I’ve saved the best for last. Early in 2018, Berkshire’s board elected Ajit Jain and Greg Abel as directors of…

OxyContin Maker Cuts Sales Force

In a surprise move, Purdue Pharma, the manufacturer of the opiate painkiller OxyContin, has said that it will reduce its direct sales force and stop the direct marketing of opiates to doctors. In a release yesterday, the drug maker said it had reduced its sales force by more than half to about 200 positions. The remaining 200 sales positions will focus their efforts on the drugmaker's non-opioid products. Purdue Pharma has total revenue of about $3 billion, with perhaps a third of the total coming from painkiller OxyContin. The company continues to be the largest…

What’s Going on with Uber in London?

Uber has been on London’s roads for a very long time. It is a taxi service which is available on call and works with the help of self-employed workers. The freelance taxi drivers will receive you from the address using a mobile phone app. It is as simple as it can get because you don’t have to make a phone call or even text, just use the app and get yourself anywhere in London. Uber has been in many controversies since past two months, and it was a surprise for almost everyone. It was even…

Economics News

Despite “Great Flexibility,” U.S. Steel and Aluminum Tariffs Set to Take Effect

After extensive international lobbying and the emergence of deep divisions on trade within the Republican Party, President Trump slightly softened his stance on import tariffs for steel and aluminum entering the United States, but nevertheless launched the 25% and 10% tariffs. Canada and Mexico were exempted from the new tariffs, despite initial White House statements that no country would be exempted. However, the President's current position appears to be that the exemption's continuance will be dependant on Canada and Mexico's willingness to renegotiate parts of the North American Free Trade Agreement (NAFTA). The President also…

Culture and its Influence on Economies

From the diverse countries around, why do some countries do very well and other seem to backslide? Why do some countries endowed with all the essential economic factors seem to fail or not do very well? For instance, how can one clarify repeated inability of the African nations even when it is observed that she receives aid in ample amount? Why do we have illustrations of countries like Philippines and Indonesia who equipped with a firm resource base are still seen to battle development? Many development economists explain these grave inequalities via a list of…

The Countries Leading 2018’s Global Economic Growth

Preliminary estimates peg 2017 global GDP growth at 3.0%, which is up from 2.4% in 2016. Among the reasons was a pickup in growth in the United States from 1.5% to 2.2% and Euro area growth from 1.8% to 2.4%. Source: World Bank Despite 2018 growth expected to accelerate only slightly from 2017 growth, the composition of the growth is expected to change substantially, as the chart below shows. Some of the specific changes in 2018 include: A slowdown in China's growth, despite a continuing high rate of growth in excess of…

Watch President Trump’s Full Speech to the World Economic Forum in Davos

https://www.youtube.com/watch?v=ap9yyHg87hc&t=16s The following is a transcript of the President's remarks in Davos, Switzerland on January 26, 2018: It’s a privilege to be here at this forum of business and science and diplomacy and people from world affairs gathered for many, many years to discuss how we can to advance prosperity and peace. I'm here to represent the interests of the American people and affirm America's friendship and partnership in building a better world. Like all nations represented at this great forum, America hopes for a future in which everyone can prosper and every child can…

Spatial Poverty Traps in India

An important aim targeted by economic growth is uplifting the poor or the downtrodden in a society. If this primary aim of economic growth is not achieved; it might lead to more problems than what it actually aims to solve. Human wants are unlimited and the means or resources available to satiate these wants are limited. For any given country, poor natural resource endowments and an inappropriate access to these natural resources is a significant patron in rising levels of poverty. Apart from peripheral and marginal changes made to enhance their conditions, poor people still…

The Death and Life of the Estate Tax

As President Trump and Congressional Republicans are poised to to place into law an historical revamp to the United States tax code, changes to the estate tax may be receiving less coverage than other items such as a big decline in the corporate tax rate, the loss of some individual tax credits, and changes in the standard deduction and child tax credits because so few are directly affected by it. It is also not consequential to federal revenues, providing only about $20 billion, or less than 1% of federal revenues. Although a similar tax had been…

Equities

The Conglomerate Discount: Is it Justified?

After making numerous acquisitions within the textile industry and gaining enormous personal wealth, Royal Little was wrestling with a conundrum by the early 1950s. His textile business’s competitive advantages were beginning to erode and the cyclicality and capital intensity of the business meant huge swings in profitability year to year. Little’s solution was to diversify the operations of his company, Textron. Textron’s first non-textile acquisition was of Burkart Manufacturing in 1953. It would go on to make a slew of subsequent acquisitions of businesses in a variety of industries. As…

Have Facebook’s Stumbles Created a Buying Opportunity?

In a rare period of gloominess for Facebook's shareholders, the stock has now slipped 20% from its high set in early February, with shares closing today at $152.22. That's still a return of 4x from its $38 IPO price in 2012. The culprit for Facebook's recent stumble is concerns over data privacy after it became public that Cambridge Analytica, a research firm with ties to numerous political candidates including Donald Trump, was able to access data from 50 million Facebook accounts in 2013. The data was accessed after 270,000 people completed…

A Compelling Case for Fairfax Financial in Today’s Environment

One of the more amusing games in financial markets is the labeling of nearly any company that owns businesses in multiple sectors to be compared to Berkshire Hathaway or any value investor with an above average record to Warren Buffett. The Virginia insurer Markel is sometimes called a “baby Berkshire.” When Eddie Lampert first took control of Sears and Kmart, talking heads declared that it was to become the next Berkshire Hathaway. Sometime in the past, Fairfax Financial Holdings’ CEO Prem Watsa was regularly compared to Warren Buffett and called…

Deferred Gratification: The Case Study of the Daily Journal Corporation

"If you haven't prepared, you won't have the courage to seize it. When I bought all that stock that the Daily Journal has in, like, one day...I knew something about Bank of America. I've lived in the culture, I've known the Bank of America bankers, I know a lot about what's right with it and what's wrong with it. I knew a lot about Wells Fargo. I knew a lot about U.S. Bank." "I talked about patience. I have read Barron's for fifty years. In fifty years I found one…

Interviews

Larry Kudlow on JFK, Reagan, Tax Cuts, and the Fed

Larry Kudlow is CNBC's Senior Contributor, an informal advisor to the Trump administration, former Associate Director of Economics at the Office of Management and Budget in the Reagan White House, and founder of the economic consultancy Kudlow and Company, LLC. EW: Mr. Kudlow, it's a great pleasure to speak to you. Thanks so much for agreeing to talk about your new book on JFK and Reagan and hopefully a little…

A Friendship that Shaped Modern Thought: Dennis Rasmussen on David Hume and Adam Smith

EW: Thanks so much for your time. You are a Political Science Professor at Tufts, in Boston. For those who are not too familiar with your background, what led you to explore the relationship between Hume and Smith so closely? DR: Well, even before starting this book I’d worked on Hume and (especially) Smith for a long time. My first book centered on Smith’s response to Jean-Jacques Rousseau’s critique of…

The Inventions that Transformed Society: A Conversation with Tim Harford

Read Tim’s Financial Times Column Purchase Fifty Inventions that Shaped the Modern Economy “Each of these inventions tells us a story, not just about human ingenuity, but about the invisible systems of the world.” – Tim Harford EW: Tim, thanks so much for speaking with me today. I really enjoyed reading the book. It did what you always seem to do so well, which is bring together multiple strands into a…

Commodities

Gas Prices Set for Temporary Rise

The battering of the U.S. Gulf Coast is shutting in at least ten refineries, which could drive gas prices up sharply. U.S. gasoline futures for September delivery are currently trading at $1.79, up from a recent low on August 17th of $1.55. Retail gasoline prices are hovering at $2.51 per…

IEA Sees Rebalancing Oil Market

In a report released today, the IEA said that global oil markets are recovering due to steady growth in demand, but that a return to stability has been hampered by non-compliance with quotas among OPEC members, particularly Algeria, Iraq, and the United Arab Emirates. Non-OPEC countries are also continuing to…

M & A

What Apple Gains from its Deal with Shazam

The news that Apple has recently bought Shazam for $400 million (disclosed by unidentified sources) is a surprise to many. The combination of Apple’s streaming service and the London-based app is now intended as the…

Ascension Health and Providence St. Joseph in Mega Hospital Merger

Just as CVS and Aetna have announced a deal to shake up the United States healthcare system, Ascension Health and Providence St. Joseph have announced a merger between the hospital owners that will continue the…

Bob Iger Looking to Extend Disney Tenure, but What is the Future of Fox Leadership?

No deal has been reached yet, but it is looking increasingly likely that Disney and Twenty-First Century Fox will strike a deal for Disney to purchase the substantial bulk of the entertainment assets of Fox;…

Disney Still Hunting Twenty-First Century Fox Assets

After failing to strike a deal because of price, Disney is once again talking to Twenty-First Century Fox about a purchase of some of Fox's assets. Comcast, owner of NBC Universal, is also considering a…

Government Sues to Block AT&T – Time Warner Merger

AT&T's transformation from a telecom provider to media distributor took a blow today as the Justice Department announced that it would sue to block its $85 billion acquisition of Time Warner from going forward. The…

Under the Hood of Berkshire Hathaway’s Pilot/Flying J Purchase

Berkshire Hathaway announced last week that it is buying truck stop and gas station owner Pilot/Flying J in a multi-step transaction that will see Berkshire initially acquire 38.6% of the company and then up their…

Unemployment

U.S. Employment Growth Weakens in May

The United States economy created 138,00 jobs in the month of May while the unemployment rate ticked lower from 4.4% to 4.3%. The job growth was somewhat disappointing and falls short of the number needed to grow the economy in the long-term. In April, 174,000…

US Non-farm Payrolls Increase by 211,000 in April

After a tepid March report, US employment accelerated in April with 211,000 jobs created according to the Bureau of Labor Statistics. The unemployment rate fell to 4.4% from 4.5% in March, a historically low rate of unemployment. The last time the US unemployment rate was…

General Motors Set to Layoff 625 Employees Amid NAFTA Waves

Reports indicate that auto maker General Motors is set to layoff over 600 employees in an Ontario plant amid recent news regarding the NAFTA agreement. Experts say the reasoning for the layoffs can be pinned directly to NAFTA and the movement of jobs away from…

US jobless claims fell to historically low level

The number US jobless claims fell last week, supported by the historically low level of cuts, suggesting that the labor market continues to tighten. The number of applications for unemployment benefits fell by 15,000 to a seasonally adjusted 234,000 in the week to January 14,…

Amazon (NASDAQ: AMZN) Touts 100,000 New Jobs in Announcement

Online giant Amazon (NASDAQ: AMZN) has announced news about adding up to 100,000 new jobs across its organization in a statement recently released. Positions would be spread across many skill levels and locations in the USA where the company is building more centers for distribution.…

Inflation

Swiss Inflation Perks Up in August

Prices in Switzerland increased by 0.5% from the year before in August, according to the Swiss Federal Statistical Office. That is an increase from the 0.3% rise in July, but still well within reasonable levels. The Swiss economy has been in deflation since 2011, although…

South Africa Reports Tamer Inflation

South African consumer inflation fell to 4.6% year over year in July, data released today showed. That's the lowest rate of inflation in the country since 2015 and compares to a 5.1% year over year rate in June. The biggest contributors the lower rate were…

May Wholesale Prices Unchanged in U.S.

Wholesale prices remained unchanged in May according to the Labor Department. It had risen by 0.5% in April and despite being unchanged in May from the previous month, the reading was 2.4% higher than a year ago. Energy and food prices were particularly weak in the…

Growth

The Countries Leading 2018’s Global Economic Growth

Preliminary estimates peg 2017 global GDP growth at 3.0%, which is up from 2.4% in 2016. Among the reasons was a pickup in growth in the United States from 1.5% to 2.2% and Euro area growth from 1.8% to 2.4%. Source: World Bank Despite 2018 growth…

Can Serbia’s Improving Economy Last?

After nearly two decades of ethnic and religious strife, Serbians had some reason for optimism in October 2006 when nearly four million Serbs went to the polls to approve a new constitution. The new constitution was contentious in its treatment of Kosovo, which later formally broke from Serbia, but marked…

U.S. Job Report Again Impresses

Employers in the United States added 228,000 jobs during the month of November, ahead of economists' expectation for an increase of 195,000. The unemployment rate was unchanged from the already low level of 4.1%. The average workweek also edged higher to 34.5 hours, but average wage growth remained relatively tepid…