Buffett is Buying a Pipeline
This seems like it could be a signal of something bigger: Warren Buffett is paying about $1bn to purchase Phillips 66 (alt), the ConocoPhillips spinoff refining, chemicals and pipeline business, and he’s paying for it with their own stock. Phillips 66 is apparently trying for a $3bn share buyback so Buffett’s 27 million should help. Phillips 66 “develops and manufactures polymers to maximise the flow potential of pipelines carrying crude oil, refined products or waste water.” This is an interesting development coming from the man who paid $26 billion for a railroad to transport oil and gas. Could this be a sign of things to come? Transporting oil by rail is still pretty popular (but not with people from Casselton, North Dakota, Pickens County, Alabama, or Lac-Megantic, Quebec), and with President Obama looking like he’ll just avoid the Keystone pipeline, it seems like oil by rail is going to continue. Also, there’s probably no reason we can’t ship oil by pipeline and rail (again, people with oil train fireballs exploding into their house probably don’t agree with that last statement). Still…they call him the Oracle of Omaha for a reason.
China Doesn’t Want Pfizer’s Drugs, Does Want Iran’s Oil
So you remember back around Thanksgiving when all of a sudden we were friends with Iran? When the P5+1 (really awkward group name; it’s the 5 permanent members of the UN Security Council and Germany) said they were going to let Iran enrich some uranium and sell some oil as long as they didn’t try to like, nuke Israel or something? Well, part of that deal also said that Tehran had to keep its oil sales business to a minimum of like, 1 million barrels per day, of which China already imports over half. Enter: Zhuhai Zhenrong Corp, the state-owned importer for state-owned oil companies in China. Zhenrong has negotiated a new contract with Iran that may theoretically (OK, yes, this is all very speculative) put pressure on Iran to export more oil than they are currently allowed. Apparently “the Chinese government may make some noises if overall imports from Iran rise too much,” which is a weird thing to say, but even better is this quote from a former Zhenrong trader about ratcheting the pressure from the United States: “More pressure? Do you think they really care?” Guess not. Meanwhile, the Chinese Food and Drug Administration (FDA) is suspending imports of Pfizer’s drug Diflucan because they were late with their paperwork. “China has been cracking down this year on the healthcare sector, with investigations ranging from allegations of corporate bribery to how drugs are priced, as well as drives to increase quality and safety levels across the sector.”
Meet the new breed of shadow lending sharks in China: Raymond Ting, Chairman and Executive Director of Credit China, charges businesses up to 50% annual interest on a book of loans worth $135 million in June. “We don’t loan to friends,” the banker said while sitting in his wine store. Wearing loafers and no socks, Mr. Ting whirled a glass of 1985 Chateau Mouton Rothschild from his collection of more than 50,000 bottles. “We have to assume that it’s always going to be bad debt,” he added. “At 3.3% a month, how can they be good people?” Quite.
The French Government is trying to figure out how to make its wealthy citizens pull France up by their bootstraps and fix this whole economic crisis thing. The original plan was to take 75% of millionaires income but the Constitutional Council said “non” since the legal maximum for taxes on any French citizen is a mere 66%. So they’re gonna tax the crap out of companies instead (apparently they don’t have corporate personhood in France). Including social contributions, the effective rate will be 75% on the portion of wages above €1 million in 2013 and 2014.
The Wall Street Journal is praising the dumb-money vanilla guys for how well they put money in an index and then went and played some golf. The Russell 2000 leads other indexes with 36.6% gain for 2013 and S&P 500 close behind at 29.1%. Active market timing managers with a lot of turnover didn’t do so well: “The more colorful your pie chart, the worse you did.” And bond investors probably didn’t have a great time: “A lot of people got really scared [of bonds], because this is the first time they’ve seen fixed income, which is supposed to be their safety bucket, take a hit.” With the United States looking so good, diversification across the globe looks less so: “People like it when diversification adds value, but they see diversification has detracted value this year.” So the Wall Street Journal must be on the efficient markets/passive management/random walk-…oh, nevermind.
American Home Prices Stabilize, Confidence Surges and Population Crawls
Standard & Poor’s/Case-Shiller: “home price index rose 0.2 percent from September to October, down from a 0.7 percent increase from August to September. Monthly price gains slowed in 18 of the 20 cities tracked by the index. And prices declined in nine cities, including Chicago, Denver and Washington.” Meanwhile, the Conference Board reports their “index of consumer confidence rose to 78.1 in December…November’s figure was revised up from 70.4. The December increase followed three months of declines.” Also, the Brookings Institution says that population growth in America is at a snail’s pace: “America’s population grew just 0.72%, or 2,255,154 people, between July 2012 and July 2013, to 316,128,839…the weakest rate of growth since after the Great Depression.” Furthermore, “the latest government reports suggest state-to-state migration remains modest. While middle-age and older people appear to be packing their bags more, the young – who move the most – are largely staying put. And demographers are still waiting to see an expected post-recession uptick in births as U.S. women who put off children now decide to have them.”
Global: 2013 Counted Out
Great visual display of a bunch of facts and statistics from 2013. My favorites: 10% (the percentage of US corporate cash that Apple is sitting on), 1.6mn (The number of tear gas projectiles that Bahrain wishes to purchase), $142.2mn and $72mn (one of these numbers is what someone paid for some art; the other is what India paid to go to Mars).