As 2016 draws to a close, a sense of unease is gripping many commentators as they look ahead. This year brought victories for Brexit and Donald Trump. The outcome of both votes were largely unexpected. What will 2017 bring? The EU is facing three, or even four, elections in major member states. The Netherlands, France, Germany and possibly also Italy will go to the polls. The outcome in all four elections is far from certain at this stage. Indeed, voting behavior seems to have become difficult to predict.
Economic and sociological research points to a number of different factors provoking these recent results. The debate is broadly about whether it is economic issues such as income inequality, cultural issues such as a rejection of equal rights for women, minorities and gay people, or factors relating to citizens’ perceived loss of control over their destiny that has driven people to support populist candidates and causes.
At first sight, the economic factors seem to have played a strong role. The vote for Brexit predominantly came from the countryside, where GDP per capita levels are significantly lower than in the cities. Moreover, income inequality levels are much higher in the United States and the U.K. than in continental Europe. And indeed, one can show that the Brexit vote is significantly affected by regional income inequality though the effect may not be very large.
The second explanation is a rejection of progressive cultural norms. An interesting study by Ingelhart and Norris emphasizes very much this aspect. They offer evidence that the recent protest votes are a cultural backlash against progressive values. And indeed, discourse especially on social media has totally changed. Unfortunately, it seems to have become widely acceptable to talk of white supremacy and engage in racist discourse.
Bayer, the German chemicals and pharma group, confirmed its offer to acquire Monsanto, with a $122 per share all-cash offer which values the US agribusiness at $62bn.
The offer represents a 37 per cent premium to Monsanto’s undisturbed share price of $89.03 on May 9
The German group said buying Monsanto would be a “compelling opportunity to create a global agricultural leader”. Bayer said it expected annual synergies of about $1.5bn after the third year, plus additional benefits in future years.
“We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders,” said Werner Baumann, Bayer’s chief executive in a statement.
“Romanticizing that you are a contrarian when you are indistinguishable from consensus can’t be good.”
The quote above comes from Adam Parker, Morgan Stanley’s U.S.equity strategist and director of quantitative research. He set the Internet abuzz this past weekend with a research note in which he wondered why he keeps getting questions from money managers about why stocks rose in the past two months and what will happen next. Most, he said, preface their queries by noting that they are contrarians. They then proceed to ask the same questions:
What is this price action telling you?
What are other investors asking you about?”
How are other people positioned?
What’s the current sentiment?
The belief among many managers is that their perspective is unique or contrarian, while everyone else’s is mainstream, seems to be surprisingly common.
Therein lies the paradox of looking at sentiment data. Everyone thinks of themselves as above average, just like the children of Lake Wobegon. Of course, believing yourself above average is a very average thing to believe.
Let’s use Parker’s comments as a reminder about why it is only when sentiment data hits extremes that it has much use as a signal for the above-average investor…
According to the new guidelines, all television series in China are required to exclude contents involving same-sex romance, extramarital affairs, underage love and other concepts allegedly discrediting China’s “common values,” the paper reported.
The authorities outlawed detailed crime investigation scenes to be shown on television, allegedly in a bid to prevent inspiring criminals, the paper reported.
The prohibition also concerns scenes depicting reincarnation and witchcraft, according to the paper.
Underage love, smoking, drinking and fighting were also prohibited from television screens. The authorities reportedly cited potential “bad influences on juveniles” as a reason for the ban.
While there are numerous financial institutions in the world that are full of hidden NPLs and over-leveraged, trading at extreme levels of risk, the FSA’s “Too-Interconnected-To-Fail” list of systemically critical banks is where global investors’ attention is really focused.
BMO Capital Markets breaks down the world’s most systemically critical financial institutions using their own “special sauce” of CDS levels, CDS term structure, equity price, liquidity, and spread trends.
Companies with more women on their boards have delivered a 36 per cent better return on equity since 2010 than those groups lacking board diversity, according to MSCI, the index provider.
Equality campaigners say the findings will add pressure to large investors to push for change at the companies they are invested in.
Helena Morrissey, chief executive of Newton Investment Management, a subsidiary of BNY Mellon, and a leading activist for gender equality in the workplace, said: “It seems pretty obvious to me that companies that have more women at the top are also likely to have inclusive cultures and be forward looking about the needs of their customers and threats and opportunities from competitors.”
MSCI examined the 1,643 companies that make up the MSCI World benchmark and found that groups with strong female leadership delivered a 10.1 per cent return on equity, compared with 7.4 per cent for those companies without.
Strong female leadership is defined by MSCI as those boards containing three or more women, or one with a female chief executive and at least one other female board member.
Currently women make up less than 17 per cent of Nasdaq 100 boards in the US and just a quarter of FTSE 100 boards in the UK.
German chancellor Angela Merkel has called for an emergency EU summit next week on the refugee crisis.
The agenda would include better support for the countries of origin of refugees, closer cooperation with Turkey (a transit country for many Middle Easter migrants) and the development of refugee reception centres on the EU’s external borders.
Ms Merkel’s call comes the day after the EU’s interior ministers were unable to agree a new system to handle the migrant influx, with a handful of central and eastern European countries balking at a proposal that another 120,000 refugees in Greece and Italy be redistributed around the EU. Thus far, they have only agreed to accept 40,000.
Germany has announced it could take in half a million asylum seekers a year, although the country is already creaking under the pressure of what has become an influx of refugees to its borders.
Earlier on Tuesday, Hungary declared a state of emergency to deal with the growing refugee crisis. Hungarian armed forces have also added reinforcements to a 4m-high razor wire fence along its 110-mile border with Serbia while the government has put a new anti-migrant law into effect.
China’s economic data for September will not be collated until early next month, but the ruling Chinese Communist party has already decided they will bring cheering news.
“The focus for the month of September will be strengthening economic propaganda and . . . promoting the discourse on China’s bright economic future and the superiority of China’s system,” the party’s propaganda department said in a directive to national media outlets.
That “bright future” is a picture that has been clouded by bleak economic data points and plunging shares in recent months. Turmoil in China, exacerbated by last month’s currency devaluation, unleashed a global stock market rout.
A photograph of the latest directive was posted online by California-based China Digital Times, which monitors Chinese media and internet censorship. “They want to control how the media frames and interprets [economic data], making sure that they all focus on positive things,” said Xiao Qiang, CDT founder.
CDT also posted a notice from the chief editor’s office at the Xinhua news agency, dated September 7, that reiterated the need to “stabilise expectations and inspire confidence”. The Xinhua notice instructed staff to “please plan related reporting” and send their story ideas to the agency’s Creative Planning Center.