The 300 Club

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over 13 years ago

Bill Gross takes his shots

Bond fund king Bill Gross is stirring things up in his own backyard, criticizing America’s business culture and warning that financier’s have lost the “high ground.”

In comments posted on the website of Pacific Investment Management Co., where he is managing director, Mr. Gross cites a string of busts, from the Savings & Loan crisis to the collapse of Lehman Brothers. While this may seem odd for one of America’s leading business figures, Mr. Gross is oft vocal with his thoughts. Other business leaders, too, have lamented the financial crisis.

Mr. Gross, who included himself in the “rogue’s gallery,” has a wonderful way with words. Among his comments:

“Fifty years ago, the highest paid and most prestigious professions were that of a doctor or a 707 airline pilot who flew the ‘golden’ route from Los Angeles to Honolulu. Today the yellow brick road begins on Wall Street or the City. Aside from supernova innovators such as Steve Jobs or Mark Zuckerberg, the money is made from securitizing things instead of booting and rebuilding America. The tallest buildings in almost every major city are banks, with tens of thousands of people shuffling and trading paper for a living. One of this country’s premier investment banks paid each of its 26,000 employees an average of $370,000 in 2010, nearly 10 times the take-home pay of other American workers.”

“Having been part of this process and even a member of the rogue’s gallery itself, I know one thing for sure: This is not God’s work – it has the unmistakable odour of Mammon. PIMCO, while Mammonesque, is a company to be proud of. I can say with confidence that there are very few clients who have not benefited from our investment management over the years. Some of the rest of this industry, however, I’m not so sure of: rating agencies that perpetually fail at commonsensical quality judgments, bankers that make loans to subterranean credits and then extend the beggar’s bowl for themselves, and 80 per cent of active money managers that under-perform the market. As a profession we have failed miserably at our primary function – the efficient and productive allocation of capital.”

“Financiers have lost their high ground and, if truth be told, we began to lose it a long time ago when we figured out that money was more than a medium of exchange or a poor substitute for a store of value. We figured out a turbocharged way to make money with money and proclaimed ourselves geniuses in the process. Well, we’re not. We may be categorized as ‘opportunists,’ to be generous, but society’s ‘paragons’ and a legitimate destination for a significant percentage of college graduates? Hardly.”

“This country desperately requires a rebalancing of priorities. After readjusting the compensation scales via regulation and/or free market common sense, America needs to anoint a new set of Mensans who can create something more than a cash machine and make this country competitive again in the global marketplace. We need to find a new economic Keynes or at least elect a chastened Congress that can take our structurally unemployed and give them a chance to be productive workers again ... America requires more than a makeover or a facelift. It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system.”

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Bernanke urges fiscal action

Federal Reserve Chairman Ben Bernanke today issued a stark warning to U.S. politicians to deal with America's growing debt.

"One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point," the central bank chief said in the text of a speech to the National Press Club in Washington.

"The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will be a rapid and painful response to a looming or actual fiscal crisis," he said.

"Acting now to develop a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence."

Mr. Bernanke also cited an improving economic picture, but reiterated his concern over persistenly high unemployment.

More jobs needed for real recovery: Bernanke

Taleb's advice

Nassim Taleb has some advice for investors: Stay away from U.S. Treasury securities, and, after that, stay away from the U.S. dollar.

The author of The Black Swan told a conference in Moscow today that he prefers the euro to the greenback, despite the debt challenges in Europe, according to Bloomberg News.

"Euros have Germany, the dollar has nothing," Mr. Taleb said, the news agency reported.

"As skeptical as I am about Europe, I prefer it by far to the United States," he added.

The Federal Reserve has been trying to drive down longer-term interest rates by buying up hundreds of billions in longer-term Treasuries to help juice the economy. At the same time, U.S. debt levels have swelled to historic levels.

"We have a very dire situation in the United States, and every day that goes by it gets worse. Every day that goes by, we're spending money," Mr. Taleb said. "We're increasing that cumulative debt."

Maple Leaf in shakeup

Maple Leaf Foods Inc. is shaking up its board to address shareholder complaints about the independence of its some of its directors, The Globe and Mail's Jacquie McNish reports today.

Maple Leaf is nominating shareholder activist and hedge fund operator Greg Boland and another unnamed outsider to its board. The company is also expected to announce plans to shrink its 14-member board by four seats in 2012 and appoint a number of new independent directors.

The changes are a victory for Mr. Boland and his fund West Face Capital Inc., which has been pushing the company to overhaul its board.

Maple Leaf shakes up boardroom

Newmont to acquire Fronteer

Newmont Mining Corp. has struck a cash-and-stock deal, which it values at $2.3-billion, for Canada's Fronteer Gold Inc. .

The proposed takeover will give Newmont Fronteer's Long Canyon and Sandman projects in Nevada, where the U.S. miner already operates.

Under the deal, Fronteer shareholders would get $14 in cash and a share in a new company that will hold some of Fronteer's assets.

The deal marks the latest in a series of mining acquisitions in recent weeks as mining companies use cash built up from soaring commodity prices to expand their asset base in a race for the world's shrinking resources, Globe and Mail mining writer Brenda Bouw reports.

Newmont to buy Fronteer for $2.3-billion

Japanese steel makers to merge

Call it Merger Thursday. Along with the Newmont-Fronteer marriage, two of Japan's major steel makers said today they plan to merge, a move that will create the world's second-biggest such company next to ArcelorMittal.

Nippon Steel Corp. and Sumitomo Metal Industries will, according to reports, probably result in the former swallowing the latter.

Steel makers in Japan, hit by soaring input costs, have been hurt by domestic companies, such as Toyota Motor Corp. and Nissan Motor Co., building fewer vehicles in the country, Reuters noted, while competition from South Korea and China has escalated.

Two of Japan's major steel makers to combine

Food prices at new high

Global food prices have hit a new high, and show no signs of easing any time soon, which can only serve to exacerbate unrest in several regions.

The Food and Agriculture Organization of the United Nations its food price index climbed 3.4 per cent in January from December, hitting its seventh consecutive peak. The FAO has been tracking prices since 1990.

All food groups rose in January, but for meat, which was unchanged.

"The new figures clearly show that the upward pressure on world food prices is not abating," said FAO economist Abdolreza Abbassian.

"These high prices are likely to persist in the months to come. High food prices are of major concern especially for low-income food deficit countries that may face problems in financing food imports and for poor households which spend a large share of their income on food."

The only "encouraging" news is that several countries are seeing lower than peak prices after good harvests.

Economist warns on housing

Any move by the Bank of Canada could “easily” cause house prices to collapse, Capital Economics warns in a bleak report that suggests the Canadian housing market is likely to suffer the same sort of crash that has plagued countries such as the United States.

The report suggests that house prices in Canada have climbed at the same pace as the in United States, but have not fallen at the same rate, Globe and Mail real estate writer Steve Ladurantaye reports.

Rate hikes could spark house price collapse, economist warns

ECB holds rates steady

The European Central Bank today held interest rates at a record low, but chief Jean-Claude Trichet made it clear he has an eye on inflation, which is already at 2.4 per cent.

Mr. Trichet told reporters that inflation so far is due largely to energy and commodity prices, which at this point doesn't change his view on overall price stability.

But, he added, "very close monitoring is warranted."

U.S. productivity rises

The productivity of the American work force is picking up, which is sure to lead to more finger-pointing at the Canadian companies that have to compete in the U.S. market.

Productivity in the fourth quarter climbed at an annual pace of 2.6 per cent, up from 2.4 per cent in the third quarter, the Labour Department said today. Overall last year, productivity, or output of work per hour, rose 3.6 per cent for the fastest showing in eight years.

"The unprecedented surge in U.S. productivity that began during the recession is fading although, that said, productivity is still growing at a pace that most other developed countries can only dream of," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

But as policy makers and economists urge Canadian companies to pick up the pace, National Bank Financial has an interesting take: Productivity in Canada has been pulled down by the services sector, while the pace of growth among manufacturers has been in a "dead heat" with those in the United States since the recovery began.

Thus, there's no "death knell" for Canadian exporters even with the loonie above parity with the U.S. currency.

Economy Lab: High Canadian dollar no 'death knell' for factories

Tories to overturn CRTC ruling

The Harper government will overturn the CRTC’s decision that effectively ends “unlimited use” Internet plans if the regulator doesn’t rescind the decision itself, The Globe and Mail's Steven Chase reports today.

Industry Minister Tony Clement made the surprise announcement late yesterday via his closely followed Twitter account.

Given this ultimatum from the Tories, the options facing the independent regulator are to reconsider the ruling of its own volition or see the cabinet use its power to reverse it.

Enbridge boosts dividend

Enbridge Inc. today posted a gain in fourth-quarter profit to $326-million or 87 cents a share, from $300-million or 80 cents a year earlier.

The pipeline giant also boosted its quarterly dividend by 15 per cent - to 49 cents a share - and projected earnings per share this year would come in at $2.75 to $2.95.

”Few peers can match Enbridge's track record of consistently increasing its dividend," said chief executive officer Patrick Daniel. "Over the past 10 years, we have delivered an average annual dividend increase of 11 per cent."

Enbridge boosts payout, profit rises

All that glitters is ... copper (and maybe tin)

Copper surged today to a record $10,000 a tonne, while tin climbed to a record $30,900.

Copper soars to $10,000

Boyd Erman's Morning Meeting

The Securities and Exchange Commission continues to struggle with getting its books right, Streetwise columnist Boyd Erman reports today.