— Michael J. de la Merced
What to make of the new roles at Berkshire.
In naming Greg Abel and Ajit Jain as vice chairmen, the Oracle of Omaha may be further signaling that one of them is likely to succeed him as C.E.O. someday. (Both were also named to the board.)
Who are they?
• Mr. Abel is the chairman of Berkshire’s energy unit, which earned $2.3 billion in 2016. He’ll be vice chairman for non-insurance businesses.
• Mr. Jain is the longtime head of Berkshire’s vast reinsurance operations. He will become vice chairman for insurance operations.
Is Mr. Buffett going anytime soon? Probably not. In the news release announcing the appointments, Mr. Buffett and his longtime partner Charlie Munger said that they would remain responsible for big investment decisions.
The context: Mr. Buffett has already said that his responsibilities would be split into three once he departs. His son Howard will be chairman. The investors Todd Combs and Ted Weschler will be the chief stock pickers. The big question has been who would take over as C.E.O.
The end of the bond bull market?
Yields on the benchmark 10-year Treasury note have risen for five straight days. On Wednesday, they traded above 2.58, their highest level since March, after Bloomberg reported that senior Chinese officials “have recommended slowing or halting purchases of U.S. Treasuries.”
This rise in yields has again ignited speculation that Treasury prices are set for an extended period of declines. Yields rise when bond prices fall. On Tuesday, Bill Gross of Janus Henderson Group declared a bond bear market.
Of course, plenty of investors and market watchers, including on a number of previous occasions Mr. Gross, have called an end to the golden era for bonds over the years. Yet the bond bull market has marched on.
Still, there are plenty of reasons for bond investors to be jittery these days. Central banks around the world are in tightening mode and are stepping back from the bond market. The global economy is gathering momentum and expectations for higher inflation are picking up.
The current rise has Treasury yields approaching the level that some say would trigger the end of the bond bull market. A year ago, Mr. Gross pegged that level at 2.6 percent, while Jeffrey Gundlach, chief executive of DoubleLine Capital and manager of one of the largest U.S. bond funds, said 3 percent was the line.
Can bitcoin succeed in becoming a real currency?
Goldman Sachs thinks so, at least in theory, but “the bar looks high.”
The argument for: “If it proves capable of facilitating transactions at a low cost and/or providing better risk-adjusted returns for portfolios.”
But the bar is high: “The currencies of most developed market economies already deliver these monetary services quite well. And if blockchain technologies go mainstream, as seems likely, the bar will look even higher. That said, Bitcoin (and cryptocurrencies more generally) may offer viable alternatives in countries and corners of the financial system where the traditional services of money are inadequately supplied.”
Credit Gene J. Puskar/Associated Press
Sears again warns it will “consider all other options” if its turnaround efforts fail.
The store chain is already considered at risk of filing for bankruptcy, as it struggles to survive a tough market for retailers. This morning, it outlined yet more steps that it’s undertaking to stay afloat.
What Sears said it plans to do now
• The company has already arranged a new $100 million loan backed by ground leases and some intellectual property
• It is trying to raise an additional $200 million, supported by the same collateral
• It is trying to secure more than $600 million in a new credit facility, backed by additional property.
• Cut some $200 million in costs that aren’t tied to store closures.
• Potentially close more Sears and Kmart stores.
These steps, Sears asserted, should help the company return to profitability this year.
The bad news: Same-store sales for the first two months of the fourth quarter fell about 16 percent. And adjusted losses before interest, taxes, depreciation and amortization for the quarter are expected to come in between $10 million and $70 million.
What Sears’s chairman, Eddie Lampert, says
From a corporate blog post:
While these actions have so far helped our company survive the so-called “Retail Apocalypse”, many observers are not persuaded that Sears Holdings can be a viable competitor in the long term. It is obvious that to overcome such skepticism and obtain the support of outside lenders and our vendor community – which is crucial to the success of any retailer – we need to undertake further measures.
— Michael J. de la Merced
A Chinese move that could spook the markets.
From Bloomberg, citing unnamed sources:
Officials reviewing China’s foreign-exchange holdings have recommended slowing or halting purchases of U.S. Treasuries, according to people familiar with the matter.
China holds the world’s largest foreign-exchange reserves, at $3.1 trillion, and regularly assesses its strategy for investing them. It isn’t clear whether the recommendations of the officials have been adopted.
Futures in major indexes, including the S. & P. 500 and the Dow Jones industrial average, were down in premarket trading.
Credit Laurent Gillieron/KEYSTONE, via Associated Press
What will Trump say in the home of globalism?
Here’s what the president plans to do at the World Economic Forum in Davos, Switzerland, according to the White House press secretary, Sarah Huckabee Sanders:
“The president looks forward to promoting his policies to strengthen American businesses, American industries and American workers.”
Other heads of state have promoted a very different message — including Xi Jinping of China, who defended globalism there last year. As the WSJ editorial board put it, “Davos In, Bannon Out.” (More on the latter later.)
The context: Only one president, Bill Clinton, has attended the forum in person. (Ronald Reagan spoke via videoconference.) And even some White House advisers suggest that visiting a gathering of world leaders, C.E.O.s, billionaires and celebrities appears to run counter to Mr. Trump’s populist agenda.
A tip for newbie Davos-goers: Plan on walking — traffic is bad even without a presidential motorcade to snarl it up.
The globalization flyaround
• Emmanuel Macron visited China with a gift horse and a defense of global trade. (NYT)
• British political leaders have made a direct appeal to the German business community to help forge a sympathetic Brexit deal. (Guardian)
• The European Union is advising companies to prepare for Britain to become a “third country” with no automatic right to operate in the single market. (FT)
• Toyota and Mazda plan to build a $1.6 billion plant in northern Alabama. (NYT)
Credit Reed Saxon/Associated Press
Is this a win for business leaders on immigration?
Exhibit A: Mr. Trump appeared ready to support a deal that would eventually give millions of undocumented immigrants a path to citizenship.
Exhibit B: A federal judge ruled that the federal program known as DACA, which shields some young immigrants, must be maintained, despite the administration’s decision to end it.
The context: Executives like Tim Cook of Apple and Brad Smith of Microsoft have spoken out extensively in support of the young immigrants.
The Washington flyaround
• Read the transcript of the Congressional testimony of Glenn Simpson, the founder of the research firm Fusion GPS, as part of the Senate Judiciary Committee’s investigation into Russian interference in the 2016 presidential election. (NYT)
• Michael Cohen, Mr. Trump’s longtime lawyer, has sued BuzzFeed and Fusion GPS over the claims in the Steele dossier, which was commissioned by Fusion GPS and published by BuzzFeed, that he was a central figure in a Russian conspiracy. (NYT)
Credit Lexey Swall for The New York Times
Breitbart after Bannon.
With Steve Bannon gone from Breitbart for disparaging the president and Donald Trump Jr., what influence will the media company have at the White House? Mr. Trump appears unlikely to turn away from the populist stances on trade and parts of immigration policy that Breitbart and Mr. Bannon have championed.
The Mercer angle
Rebekah Mercer, Mr. Bannon’s estranged patron and one of Breitbart’s owners, pledged support to Mr. Trump after controversy erupted over the adviser’s comments, the WSJ reports.
More on Ms. Mercer’s role in Mr. Bannon’s departure from Jeremy Peters of the NYT:
His situation at Breitbart grew untenable, said one person close to the situation, in part because Ms. Mercer, whose family finances conservative causes with their hedge fund wealth, became concerned that she could face legal exposure.
What’s next for Bannon?
He is reportedly building a new political advocacy group, but it’s not apparent who would want to back him. (He’s also lost his radio show on Sirius XM.)
The shareholder activism flyaround
• Activist funds invested $62 billion in campaigns around the world, more than twice the 2016 figure, Lazard’s year-end review found. (Lazard)
• The internet performance company Akamai Technologies is working with Morgan Stanley to explore “strategic alternatives,” including a potential sale, amid pressure from Elliott Management, according to unnamed sources. (Bloomberg)
Credit Carlo Allegri/Reuters
Why is Kodak getting into virtual currency?
The cynical answer: Kodak’s surged 34 percent after it announced a “major blockchain initiative.”
Critic’s corner: Tom Buerkle of Breakingviews writes: “A blockchain platform could give photographers a better way to license their images and receive payment. But it’s hard to see how that will reverse Kodak’s decades-long decline.”
The digital money flyaround
• China is moving to eradicate Bitcoin mining over concerns about electricity consumption and financial risk. (FT)
• The value of the virtual currency Ripple has continued to fall, as much as 24 percent over the last day. (Bloomberg)
The workplace misconduct flyaround
• About three-quarters of women in jobs related to programming they’ve experienced discrimination in the workplace, the Pew Research Center reports. Among men, it was 16 percent. (Recode)
• Rose McGowan will star in a documentary series, “Citizen Rose,” that started filming a month before the NYT disclosed her settlement agreement with Harvey Weinstein. (NYT)
• The host of “Face the Nation,” John Dickerson, will replace Charlie Rose on “CBS This Morning.” (NYT)
• The actress Catherine Deneuve joined more than 100 Frenchwomen in entertainment, publishing and academia in arguing that movements like #MeToo and the French #Balancetonporc have gone too far. (NYT)
• Bridgewater Associates has hired Vanessa Selbst, the most successful woman in the professional poker world, in an unspecified role, according to Bloomberg.
• Warner Bros. has named Toby Emmerich as the head of its worldwide film production, distribution and marketing operations, ending a power struggle between him and Sue Kroll.
Credit Eduardo Munoz/Reuters
Quote of the Day
“People think it is safe. I have the feeling it is just the opposite.”
— Jeff Gundlach, the founder of the money management firm DoubleLine Capital, on why he thinks the S. & P. 500 will have a negative return this year.
The Speed Read
• Twitter missed a Monday deadline to respond to written questions about Russian election interference from the Senate Intelligence Committee. (Axios)
• LionTree, the bank focused on tech, media and telecoms, has formed a funding partnership with Searchlight Capital Partners. (Businesswire)
• American International Group had talks to buy Voya Financial for more than $10 billion, according to people familiar with the matter. The negotiations fell apart in November, but were a sign of the insurer’s interest in big deals. (Bloomberg)
• Peloton’s $4,000 treadmill suggests a future for gadget businesses: It’s all about service. (NYT)
• Electric companies in states like Massachusetts and Illinois say they will pass their tax cuts to customers through lower rates. Other utilities might follow. (NYT)
• The toymaker VTech agreed to pay $650,000 to settle charges that it had collected digital data on children without parents’ permission and then failed to keep it secure, the Federal Trade Commission said on Monday. (NYT)
• Ever more experts, including some Federal Reserve officials, agree the Fed needs a new approach to managing the economy differently — but not on which new approach. (NYT)
• Speaking at CES on Tuesday, Huawei’s consumer products chief called AT&T’s decision not to sell its phones in the U.S. a “loss for consumers.” (The Verge)
• Norway’s sovereign wealth fund wants to be allowed to invest in unlisted companies because technology groups are holding off going public. (FT)
• Rupert Murdoch is finalizing the purchase of about 10 television stations from Sinclair Broadcast Group, which will bolster Fox’s portfolio of channels, according to three people familiar with the matter. (FT)
• Uber agreed to pay up to $3 million to settle a proposed class-action lawsuit that accused it of docking excessive fees from New York drivers’ fares. (Reuters)
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