Connect with us

Business

How a 7-Eleven takeover could reshape corporate Japan

Published

on

This is an audio transcript of the Behind the Money podcast episode: ‘How a 7-Eleven takeover could reshape corporate Japan

Michela Tindera
Over the weekend, my colleague, Leo Lewis stopped by a 7-Eleven in central Tokyo. Inside, he grabbed a fruit cup, some strawberries, bananas from one of the store’s freezers, and he made himself a smoothie. He also pulled some cash out of an ATM. Leo’s the FT’s Tokyo bureau chief, so he’s in a 7-Eleven . . . 

Leo Lewis
Across the week, I’d say it’s at least a dozen times that I go in for one reason or another.

Michela Tindera
Think about a convenience store and a lot of places around the world. You pop in to grab a soda or some candy for a road trip. And those hot dogs rolling on the griddle look . . . well, they just look sad. But that’s a far cry from what you’re getting at a Japanese 7-Eleven.

Advertisement

Leo Lewis
7-Eleven convenience stores in Japan are an extraordinary kind of phenomenon, really. It provides services that convenience stores elsewhere in the world could really only dream of.

Michela Tindera
But now a Canadian company wants to acquire these quintessentially Japanese shops, and that is a big deal, Leo says. Not only because 7-Eleven has this reputation in Japan, but also because for a long time, most domestic companies have basically had giant “not for sale” signs hanging on their front doors. And those signs have been especially pointed towards foreign companies.

Leo Lewis
For 20-odd years, I’ve been covering Japan. There’s been an expectation that something like this might one day happen. And all sorts of reasons why it never happened. And then suddenly it has and on grand scale.

[MUSIC PLAYING]

Advertisement

Michela Tindera
And this proposed deal, Leo guesses, could be the first of many more to come.

Leo Lewis
And what this opens up is even more exciting, which is Japan becoming a serious global mergers and acquisitions market that is testing something new in Japan. But what we think is going to happen is that this opens the way for M&A by foreign companies looking to buy Japanese companies in a way that we just haven’t seen before.

[MUSIC PLAYING]

Michela Tindera
I’m Michela Tindera from the Financial Times. Today on Behind the Money, why a proposed takeover of a beloved convenience store chain in Japan could mark a big change in the country’s dealmaking and corporate culture. Does it signal that Japan is finally open to foreign acquisitions?

Advertisement

[MUSIC PLAYING]

In August, that Canadian company, a business called Alimentation Couche-Tard, made an unsolicited offer to buy Japan’s Seven & i Holdings. Couche-Tard is best known for its convenience store chain Circle K. Meanwhile . . . 

Leo Lewis
Seven & i is a big retail conglomerate in Japan and it’s most famous for owning 7-Eleven. It’s got 85,000 branches of that franchise around the world in different forms. It’s got supermarkets, got restaurants. It’s got financial services. It’s got stores that sell baby goods.

Michela Tindera
Leo says those 7-Eleven stores are the jewels in Seven & i’s crown.

Advertisement

Leo Lewis
At the same time, Couche-Tard, which is a Canadian operator of convenience stores, has grown very aggressively through M&A. And so Couche-Tard is thinking, well look, there’s an opportunity here to create an absolute global giant in convenience stores. And the Canadian company has told its shareholders that it sees white space on the global map and that that white space is something that it could fill with an acquisition on this scale.

Michela Tindera
Now, Seven & i is worth about $40bn on the Tokyo stock market. So this would be Japan’s largest foreign-led takeover. It’s an ambitious proposal, but Leo says this isn’t even the first time that Couche-Tard has tried to buy Seven & i.

Leo Lewis
So the mid-2000s, it evidently expressed some form of interest. It came back again with an approach of some sort within the last sort of four years, and then it really stepped things up this year.

Michela Tindera
So this time when Couche-Tard approached Seven & i, why were things different now, as opposed to the past two times that the company has approached Seven & i, what’s different now?

Advertisement

Leo Lewis
So Japanese companies have obviously, been buying things around the world for a long time. They’ve had no problem going overseas to look for M&A. But it’s been a very different story when foreigners or foreign companies have come to Japan in the hope of buying something in Japan. If Couche-Tard had written a letter, you know, 10 years ago to the management of Seven & i saying we’d like to engage in talks, we have a proposal for an offer. It would have been perfectly reasonable at that point for the Seven & i management to just put that, you know, in a bin or in a filing cabinet and never look at it again. And certainly not tell the rest of the board and not the shareholders.

Michela Tindera
Now, there are a few reasons for that kind of behaviour. But Leo tells me that a lot of it boils down to the role of shareholders at companies in Japan or rather their lack of a role.

Leo Lewis
Japan could be thought of as a place where historically Japanese managements have not been under huge pressure from shareholders and they have been able to, some would say, get away with being quite complacent when it comes to delivering for their shareholders.

Michela Tindera
In a lot of places around the world, companies tend to live by a guiding principle, that’s maximising shareholder value. It means driving up a company’s share price and basically aiming to offer a higher return on investment for shareholders. But Leo says the focus of Japanese companies is often spread wider than that.

Advertisement

Leo Lewis
By and large, the relationship has been one where shareholders are made to feel that they are just one of a number of stakeholders that, you know, deserve the attention and focus of company managements. In some cases, they have focused on what’s best for their customers or what’s best for their suppliers and, you know, other stakeholders, including broadly, Japanese society. So, you know, M&A in Japan has been heavily impacted by that. And so what you have is that if the companies are not bound by the need to constantly look out for, you know, is this in the interests of shareholders? How can we further the interests of shareholders? They haven’t entertained potential offers or requests for conversations with potential buyers, either domestically or with foreigners.

Michela Tindera
But recently, all that’s been changing.

Leo Lewis
One of the things that has happened is that there’s been a clash as the number of foreign shareholders has risen on the registers of Japanese companies. In some cases, it’s more than half. Those foreign investors have taken the kind of norms of, let’s say, the US or the UK markets and applied them to Japanese companies, then been frustrated when they find that the Japanese companies haven’t really focused so much on delivering for the shareholders.

[MUSIC PLAYING]

Advertisement

Michela Tindera
Japan’s government has been trying, for a while, to get companies to pay more attention to their shareholders and promote dealmaking. And last year, Japan revised its mergers and acquisitions guidelines, and those revisions now look like a real factor in the way that foreign and Japanese companies think about dealmaking.

Leo Lewis
The change that was made last year was sort of almost explicitly intended to promote more M&A.

Michela Tindera
The idea being that more dealmaking means a more dynamic stock market, which creates a better economic picture for the country on the whole.

Leo, so walk me through this. What are in these revised guidelines?

Advertisement

Leo Lewis
It said that best practice for companies should be that if they receive a bona fide approach from a would-be buyer as a matter of best practice, that they should set up a special committee to advise the board on whether they should take this further and how to respond to that.

Michela Tindera
In essence, management isn’t supposed to receive a legitimate offer letter and just, you know, throw it in the trash.

Leo Lewis
And the second part of this is, look, you know, Japanese companies have to accept that if there is an offer that’s coming in that is higher than the current share price and that the company is not, you know, it’s not fraudulent. This is, you know, there’s a real bid possibility. There’s real money involved, that’s bona fide. And you should entertain that for the sake of shareholders.

Michela Tindera
We assess these new guidelines have had two big effects.

Advertisement

Leo Lewis
One is that domestic dealmaking has picked up very significantly. And the other is that companies do feel or appear to feel that the guidelines do have to be followed, at least, you know, as a formality. And so this Seven & i situation — which very quickly triggered the creation of a special committee within Seven & i — does seem to be following the exact pattern set out in this revised M&A guidelines. And so from the point of view of people looking on at Japan and saying what’s changed, that is the real crux. So that is the change that everyone is now looking at and going, gosh, actually, maybe this is the moment that made the big difference.

[MUSIC PLAYING]

Michela Tindera
Coming up, we’ll look closer at how this Couche-Tard acquisition could play out and what that would mean for the rest of corporate Japan.

[LIFE AND ART PODCAST TRAILER PLAYING]

Advertisement

Leo tells me that stepping inside a 7-Eleven store in Japan is a full sensory experience.

Leo Lewis
By and large, what you come into . . . first of all, is a kind of cacophony of noise. There’s a lot of machinery in there that makes noise. At the door, things as you open, you know, the refrigerator doors, make a noise when they open and there are various tunes playing. Then there’s the smell. I can’t really describe it, but at different times of the year, there are different kind of foods cooking. Nowadays there’s quite a strong smell of frying chicken because that’s one of the things that they serve behind the counters. There’s coffee that’s freshly brewed from machines that are right next to the counter. There’s obviously the kind of freshly baked goods that are around the place in different aisles. You’re constantly given the sense that pretty much anything you need to do, you can do in this shop.

Michela Tindera
All of this is because the company that runs these stores, Seven & i, have spent decades perfecting the business.

Leo Lewis
It’s been innovative in terms of putting technology into the stores, how it sells things. It’s been extremely inventive in terms of the fresh food mix that it puts in front of customers. It’s a very big part of Japanese life by design, and that’s now becoming an interesting feature of this saga.

Advertisement

Michela Tindera
That’s because while 7-Eleven has this reputation for excellence among customers and it dominates the convenience store market in Japan, these things haven’t translated into shareholder returns.

Leo Lewis
I’ve spoken to a number of investors, past and present, in Seven & i who say that the company represents the best and worst of Japan. The business in terms of both what the customer experiences and what is happening behind the scenes is world class. But as a stock, it has for a long time left a lot to be desired. So we’ve spoken to shareholders who point out that if you go back eight years to when the current CEO took that position at Seven & i, and you look at the total shareholder returns, they are in dollar terms zero, in yen terms that they’re about 20 per cent. If you look at Couche-Tard over that exact same period, the total return was over 190 per cent, with much less capital deployed.

Michela Tindera
Beyond the convenience stores, like Leo mentioned, Seven & i owns that mixture of other businesses and those have often generated mixed returns. This all brings up an important question.

Leo Lewis
And the question is, would a company that was more directly focused on its shareholders have the leeway to be as inventive and as innovative as it has been in Japan? And so that’s kind of the question that we’re playing with at the moment.

Advertisement

Michela Tindera
And what would you say to that question?

Leo Lewis
When answering that, there are really two quite well-formed sides. One would say, look, you know Japan has been an innovator and its fashion of shareholder capitalism has served it well and it served its companies well in the terms that Japan wants companies to exist. That has a purpose for them, and they seem to be serving that. Another view would be, look, they have been hamstrung by their approach to shareholder capitalism and they could do a great deal more.

Michela Tindera
So the Seven & i deal is one example of this clash playing out out in the open.

Leo Lewis
But in the main, you know, the reality of corporate Japan is that you do have a lot of companies that are making it very, very competitive. You’ve had low interest rates for a long time. That has also changed the environment. And the truth is that innovators are having a hard time. Particularly start-ups are having a hard time making an impact on this market. And so if your argument is that the start-ups are where the innovation are and the big companies are kind of suppressing that in a way, then you would look at the way that, you know, shareholder focus and investment and so on have been deployed in Japan. And you say, well, look, perhaps it’s not at this point serving the country as well as it might.

Advertisement

Michela Tindera
Now back to the offer from Couche-Tard to Seven & i. So Couche-Tard made this offer to buy Seven & i for $39bn. What did Seven & i say to that?

Leo Lewis
It came back and said no. And the decision of the special committee was, look, we’re not . . . we don’t think this is doing our shareholders a service. Shareholders could do better if the group remained independent. They’ve said that the Couche-Tard offer grossly undervalues Seven & i. And I think there are a lot of people out there, investors and so on, who would agree that this, as an initial approach, was a lowball bid and that the company must be worth a great deal more. And Couche-Tard very quickly came back and said, look, we hear those things, but we continue to be interested. And, you know, you would expect that a first, an opening bid would come in perhaps lower than everyone would want. So that there will be perhaps higher bids coming in later. We suspect that that’s the direction this is going. We don’t know yet.

Michela Tindera
Seven & i have now hired investment bankers to advise its board about the potential takeover battle.

Leo Lewis
And so we’re in what is very unusual for Japan, which is a process, a process that is going to involve both companies appealing to shareholders and both companies making their arguments very clear and in some cases, you know, out in the open.

Advertisement

Michela Tindera
And this has implications for corporate culture around M&A in Japan. It’s broken new ground.

Leo Lewis
So, you know, when you talk to brokers, investors and the kind of people have been looking at Japan for a while and are now very excited, they are putting together lists of potential targets and they’re focused on companies that would fit easily into big global companies. So, you know, a couple of the names that we’ve been hearing, Asics, the sportswear and shoemaker. Calbee, which is a big snack maker in Japan. It looks like the sort of company that could fit quite easily into a big multinational snack maker. Confectionery companies as well. So what is absolutely beyond doubt is that these companies are attractive to a would-be buyer. In many cases, the price is not that high, but the brand that could potentially be acquired is absolutely, you know, globally powerful. And that’s what’s been sort of off the table for so long.

Michela Tindera
Leo, but what about if this deal between Couche-Tard and Seven & i doesn’t work out? I mean, what would that mean for M&A activity in Japan?

Leo Lewis
If it doesn’t work out, you know, it doesn’t matter too much to the predictions of a thriving M&A market in Japan because its scale is so big that everything sort of underneath that, everything that comes in at the kind of 3- to 5- to 10- to $15bn-deal level is going to seem that much more sort of plausible and that much more manageable after this Couche-Tard-Seven & i whopper. And so I think that one of the predictions is that this is gonna change the environment so much that those sort of big but smaller deals are going to see that much more digestible.

Advertisement

[MUSIC PLAYING]

Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. Topher Forhecz is our executive producer. Sound design and mixing by Sam Giovinco. Special thanks to Dan Stewart. Cheryl Brumley is the global head of audio. Original music is by Hannis Brown. Thanks for listening. See you next week.

[MUSIC PLAYING]

Source link

Advertisement
Continue Reading
Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Business

Federal Reserve puts on enormous party hat

Published

on

This is an audio transcript of the Unhedged podcast episode: ‘Federal Reserve puts on enormous party hat

Katie Martin
A great moment in history has arrived. Rob Armstrong was right about something. Quite against the run of play — shush, Rob — quite against the run of play, the Federal Reserve has cut interest rates — hurrah — from the highest level in decades, and for the first time since the pandemic. And what’s more, it went large, cutting by half-a-point, precisely as my esteemed colleague had predicted.

What kind of voodoo is this? Does the Fed know something horrible we don’t? Cutting by half-a-point is normally a crisis measure, a cry for help. Should we panic about a recession? And really, Rob was right. End times.

Today on the show, we’re going to explain how come investors are ignoring the usual script and taking this bumper cut as a good thing. This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I’m Katie Martin, a markets columnist here at FT Towers in London. And listeners, I must tell you, the saddest of things has happened. I’m joined by Rob Armstrong, lord of the Unhedged newsletter. But the sad thing is he’s dialling in from his sickbed. Rob, I’m sorry, you’re poorly.

Advertisement

Robert Armstrong
I am poorly. It’s terrible. But on a 50-basis-point day, the dead shall rise from their graves. The angels shall sing. And we all . . . we’re all gonna talk about it.

Katie Martin
Yes. Good, strong Barry White vibes I’m getting from this voice you’re busting out today. So, as you say, half a percentage point from the Fed; that’s 50 basis points in market money. Normally central banks love being super boring and they normally move by quarter-point increments. So, I mean, was it the shock of being right about the 50-basis-point thing that pushed you over the edge into sickness?

Robert Armstrong
It could have been. I’m so accustomed to getting this wrong now that it was really paralysing. However, I think, you know, you mentioned earlier, why is the market kind of taking this in stride and seeing this as a good thing? And I think it’s a bit of a communications success by the Fed in that they told the story about this, that they’re not doing this because they have to, because it’s an emergency. They’re doing it because they can.

Katie Martin
So gangster.

Advertisement

Robert Armstrong
And the reason they can is because they’ve kind of beaten inflation. Right?

Katie Martin
So for people who, unlike us, have a life and don’t sit around watching central bank press conferences, the way this works is they do the decision, they say, here you are, here’s your 25 or 50 whatever basis points, or we’re on hold. This time around, it was 50 basis points.

And then just a little while later, there’s a press conference where the chairman, Jay Powell, gets up in front of like all of the kind of most pointy headed Fed journalists in the world and fields whatever questions. There’s a statement, and then he field whatever questions they want to throw at him. And this for him was the point of highest danger, because the risk of giving the impression somehow that . . . 

Robert Armstrong
Yes.

Advertisement

Katie Martin
Yeah, we’re really worried. That’s why we’ve done 50. That was a serious risk, right? But instead, what happened?

Robert Armstrong
Well, right from the press release announcing the 50 basis cut, they tweaked the language in the press release so that it was more affirmative and strong on the topic of inflation. We’re really pleased how it’s going on inflation.

Katie Martin
Right, right.

Robert Armstrong
And then in the press release, I mean in the press conference, he just reinforced that point again and again. The line he repeated was the labour market is fine, it’s healthy. It is at a good level. We don’t need it to get any better. We’re not trying to improve it, but we have the freedom to make sure it stays as good as it is.

Advertisement

And that message seems to have gone through. Markets didn’t move yesterday afternoon. And as a very, you know, opening minutes of trading this morning, stocks are up. So that message seems to have gotten through.

Katie Martin
Yeah. That is skills, actually. You know, I will hand it to them. Because, you know, it’s . . . we’ve said this before on this podcast. Like, it’s so easy to like throw stones and peanuts at the Fed or the European Central Bank, the Bank of England or whatever and say they messed this up. But, like, this stuff is hard. Getting the markets to come away with that sort of impression is not to be taken for granted.

Robert Armstrong
It’s not to be taken for granted. I agree. However, I will note any time you’re trying to spin a narrative and you want people to believe it, one thing that really helps is if the narrative is true. And in this case, I think it broadly is.

I think inflation really does look like it’s whipped. It’s really either at or very close to 2 per cent. And look, with an unemployment rate of 4.2 per cent and basically no increase in lay-offs and the economy is still adding jobs, I think the economy is pretty good. So it’s not like he had to spin a magical tale of unicorns and wizards here. He just had to, you know, make a case based on the facts.

Advertisement

Katie Martin
Yeah. And and that kind of goes back to the fact that the Fed is not quite like all the central banks in that it has to look after inflation, but it also has to look after the jobs market. And so, you know, again, the risk is that you come away from a decision like this and think, well, you know, those little cracks that we’ve seen in the jobs market, maybe they’re the start of something really big and hairy and awful, but he seems to have massaged this one away.

Robert Armstrong
Indeed. Impressive performance.

Katie Martin
And so the other thing they do in this press conference is they give the general public and sad nerds like us a little bit of a taster about what’s coming next from the Fed, right. So they’re always, like, central bankers are at pains to say none of this stuff is a promise. This is just our kind of best current understanding of the state of the universe. But so, then you end up with this thing called — drumroll — the dot.

Robert Armstrong
The dot plot.

Advertisement

Katie Martin
The dot plot. Explain for normal people what the dot plot is.

Robert Armstrong
OK. So it’s kind of a grid. And along the bottom are the years 2024 through 2027, and then another column for the infinite future. And then there’s a range of interest rates going up and down on the side. And every member of the monetary policy committee puts a little dot in each year column where they think the rate is gonna be in that year. Cue much speculation about what all this means, how they’ve changed their mind since the last dot plot and, you know, the implications of all of this.

Katie Martin
Whose dot is whose? We’ll never know.

Robert Armstrong
They don’t reveal whose dot is whose. That’s an important point. And by the way, Katie, according to everything we hear out of the Fed, having invented this device, which was supposed to increase clarity and make everyone’s life easier, everyone in the Fed now hates it and wishes it would go away . . . 

Advertisement

Katie Martin
Damn you, dot plot!

Robert Armstrong
Because it just causes endless, idiotic little niggling questions from people like me and you. But once you’ve invented something like this, if you take it away, people get upset.

Katie Martin
So you look at the dots and you look at what Jay Powell was saying at the press conference and what does it all add up to? Does it mean that, like, OK, they’ve started with 50 basis points, so like 50 is the new 25? Get used to it, boys and girls?

Robert Armstrong
If you look at the dot plot and their kind of aggregate expectations of where rates are gonna go, it is not that 50 is the new 25. The implication is that the rate of cuts is going to be very measured — or might I say stately, from here until they reach their target.

Advertisement

Katie Martin
Right, right.

Robert Armstrong
And, you know, another point to mention here is where they think they need to go is very important. That’s the kind of last part of the dot plot is, like, where should interest rates be when everything is normal again?

Katie Martin
Because that will happen one day. And . . . 

Robert Armstrong
Yeah, that will happen. They think it’s gonna happen sometime around 2026, 27. We’ll get to where it’s about normal and they’re looking for about 3 per cent rates in the long run and that . . . so that’s where we’re going to. Just to set the context, we cut from 5.5 per cent to 5 per cent yesterday. And the map of the dot plot shows us moving towards a little under 3 per cent over time. And it’s a matter of how quickly are we going to get there, and along the way, are we going to change our mind and decide we have to go somewhere else?

Advertisement

Katie Martin
Yeah. So is there a kind of joyful hope that maybe the Fed could be, like, boring again and it can just sort of do 25 basis points here and there and just take this kind of glide path lowering rates that doesn’t get people excited any more?

Robert Armstrong
Well, this is the problem about the future is that it is hard to predict and particularly hard to predict with interest rates. The issue is that the economy, the structure of the economy has changed a lot in the last couple of years because of the pandemic and for other reasons. So that final destination point I talked about, which economists call the neutral rate, which is the just normal, everything is boring and steady rate of interest in the economy where everyone has a job, there’s no inflation, everything’s cool, the neutral rate. We don’t know what that number is.

And Jay Powell has this line about it. We know it by its works. And what that means, stated less calmly, is we know it when we screw it up. In other words, we hit it, we go past it. We push interest rates above the neutral rate and stocks have a big puke and the economy starts to slow down and people get fired or we travel too far below it and inflation starts again. So like the Fed over the next couple of years is like walking down this passage in the complete dark and it knows it can’t touch the wall on its left or the wall on its right. Right? But it doesn’t know the shape of the passageway, what direction it’s supposed to go. So it’s just like, well, I sure hope we’re going this way. Dee-dee-dee. And hope it doesn’t hit too low or too high along the way.

Katie Martin
Hope it doesn’t just walk into a wall.

Advertisement

Robert Armstrong
The history of interest rates is history of feeling your way along in the dark.

Katie Martin
Rob, that’s the most lyrical thing I’ve ever heard you say.

Robert Armstrong
Isn’t it? It’s poetry. It’s because I’m so ill. These could be the final words of a dying man.

Katie Martin
What meds are you on for this cold you’ve got?

Advertisement

Robert Armstrong
This could be my legacy, Katie. (Laughter)

Katie Martin
I feel like we should kind of wrap up quite soon before you just like expire during the recording.

Robert Armstrong
I do. As much as I like you, I’d like to have a few words with my wife before I shove off.

Katie Martin
But I will ask you, are we ever going back to like zero interest rates, do you think? Or are we gonna look back on that…

Advertisement

Robert Armstrong
I feel like I’ve been asking a lot of questions. This is a great question, Katie, but let me push it back on you. We had this wild period in the last decade where there was like a gajillion dollars of sovereign bonds issued at a negative interest rate.

Katie Martin
I think that was something like $18tn or something.

Robert Armstrong
Money was free. It was bonkers. And it was like the Fed funds rate was up against zero. Money was free. We were all in Silicon Valley inventing start-ups whatever, doing our thing. Do you think we’re going back to that? Like once this incident, the pandemic and everything after is over, are we going back?

Katie Martin
I mean, I can’t see it. I buy the narratives that are kicking around about inflation now being structurally higher, right? There’s a climate emergency. There’s a global defence emergency. There is all sorts of things that governments need to spend lots of money on, borrow lots of money for, all things being equal. And then there’s the whole supply chain thing after COVID and with geopolitics yada-yada.

Advertisement

Robert Armstrong
And the world is getting older, right? And so when old people create demand for savings, that drives interest rates up, right?

Katie Martin
Ah, old people. Yeah.

Robert Armstrong
Old people.

Katie Martin
But I think also before we wrap up, we should note that although you were right, about 50 basis points, I was right about the timing. I said on this here very podcast back in, I think it was June 2023, the . . . Not 24. 23. That the Fed is not gonna cut rates till the third quarter this year. So what I’m saying is I’m the genius here. You’re just like a (overlapping speech) took a coin flip.

Advertisement

Robert Armstrong
You’re basically Cassandra. Doomed to see the future and not be believed.

Katie Martin
I’m going to . . . 

Robert Armstrong
Do I have the right mythological figure there? I think that was Cassandra.

Katie Martin
Absolutely no idea. But I’m going to set up a hedge fund called like hunch capital where I can invest your money for two and 20. (Laughter) Based on nothing but pure hunches. Do you want in? Because like my hunch on that, your hunch on the other. I think we’re going to make good money.

Advertisement

Robert Armstrong
We could. We could be rich people, Katie. But I will answer your question seriously. I think interest rates are higher now. We’re not going back to zero. I will end on that serious point.

Katie Martin
Yeah, yeah.

Robert Armstrong
Governments are spending too much. They have to spend too much. There’s loads of old people. There’s the green stuff has to be funded. Productivity might be rising possibly because of AI. We are going into a higher interest rate world. And by the way, the Fed thinks that. If you look at the history of the Fed’s view of what the long term normal interest rate is, that has been steadily ticking higher over the last year and a half or so.

Katie Martin
So rates have come down already pretty hard, but don’t get yourself carried away with thinking that we’re going back to zero, because ain’t . . . I mean.

Advertisement

Robert Armstrong
No. Ain’t gonna happen. Nope.

Katie Martin
Ain’t gonna happen.

[MUSIC PLAYING]

On that bombshell, we’re going to be back in a sec with Long/Short.

Advertisement

[MUSIC PLAYING]

OK, now it’s time for Long/Short, that part of the show where we go long a thing we love, short a thing we hate. Rob, I feel like you should go first before you completely lose your voice. (Laughter)

Robert Armstrong
Well, I’m going to go short wellbeing. And I say this not because my wellbeing is poor right now, but because of an article our colleague Joshua Franklin, wrote in the Financial Times yesterday that says, I’m quoting here, JPMorgan Chase has tasked one of its bankers with overseeing the company’s junior banker program, a response to renewed concerns about working conditions for young employees. And it goes on that this poor person is gonna have to make sure all these young investment bankers are happy and have work-life balance. I think investment bankers owe it to the rest of us to be miserable.

Katie Martin
Right.

Advertisement

Robert Armstrong
They make a lot of money. They are the lords of the universe. They should not be happy. Their wellbeing should be awful. And that’s what you’re getting paid for. So I think JPMorgan Chase is doing the wrong thing here. And they need to appoint a banker to oversee the what’s the opposite of wellbeing. Unwell being of their junior bankers.

Katie Martin
You’re a very, very mean person and you just want everyone to be sad like you.

Robert Armstrong
No, if you want to be happy, become a journalist and make no money. If you want to be rich, become a banker and like get divorced and have your kids hate you. It’s just the normal way of life. (Laughter)

Katie Martin
Well, I am long European banking merger drama. So if you’ve missed it, the German government is, like, quite scratchy and unhappy about a potential takeover of Commerzbank by Italy’s UniCredit. It’s the talk of the town. Everyone is kind of, you know, huddled around in bars in the city asking like, how the hell did UniCredit manage to amass like a nine per cent stake in this thing? Like that doesn’t seem like a good strategic move. There’s a lot of excitement over the motives. My interest here is that this is just like the good old days of European banking mergers with like very important European bankers wearing gilets under their jackets going around in like big fast cars and, you know, chatting away on their mobile phones and being masters of the universe.

Advertisement

Robert Armstrong
I just wish they would get along with it. As far as I know, in continental Europe, there’s actually more banks than people.

Katie Martin
Yeah, it’s like sheep in New Zealand. You’ve just got . . . (Laughter)

Robert Armstrong
They just need. I mean, as long as I’ve been in finance, people have been rattling on about how banking in Europe was going to consolidate. The industry was finally going to make some. They just need . . . I mean, as long as I’ve been in finance, people have been rattling on about how banking in Europe was going to consolidate. The industry was finally going to make some money and it was going be able to compete with the US. And then it’s like, you know, some Germans get mad at some Italians, it never happens and the cycle turns again.

Katie Martin
Yeah, it’s like we want consolidation, but no, no, no, no, no. Not like that.

Advertisement

Robert Armstrong
Not like that.

Katie Martin
Anything but that.

[MUSIC PLAYING]

And I am here for the drama is all I’m saying.

Advertisement

Robert Armstrong
Right on. I love it.

Katie Martin
OK, listeners, we are going to be back in your feed on Tuesday if Rob makes it that long, but listen up anyway, wherever you get your podcasts.

Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. We had additional help from Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. Special thanks to Laura Clarke, Alastair Mackie, Gretta Cohn and Natalie Sadler. FT premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to FT.com/unhedgedoffer. I’m Katie Martin. Thanks for listening.

[MUSIC PLAYING]

Advertisement

Source link

Continue Reading

Business

How the EU can reset foreign policy for the western Balkans

Published

on

Steven Everts makes numerous important and laudable points on the need for the EU to seriously recalibrate both its capacities and posture in foreign policy (Opinion, September 12).

It’s worth adding that in a foreign policy area on the bloc’s very borders, the EU has led the west into a dead end of failure, in which official pronouncements have never been more at variance with the on-the-ground reality.

The western Balkans is the only region in which the US consistently defers to a democratic partner’s leadership — that of the EU.

Nowhere else does the west, if united, wield greater leverage or have a wider array of policy instruments. Yet for far too long, the EU has addressed the region almost solely through its enlargement process, neglecting its foreign policy commitments — including a deterrent force in Bosnia and Herzegovina mandated by the Dayton Peace Agreement and authorised under Chapter 7 by the UN Security Council.

Advertisement

This force remains well below the brigade-strength required to pose a credible deterrent to threats to the peace and territorial integrity. In addition, the EU states it will support local authorities, who have primary responsibility to maintain a secure environment — defying the reason the mandate exists to begin with: namely to thwart attempts by local authorities to upend the peace.

The desire to maintain the fiction that the Belgrade-Pristina Dialogue is still alive compels the EU into all sorts

of contortions which in effect reward Serbia, despite allegations of Serbian involvement in recent violence, and periodic (and ongoing) threats of invasion. By straying from its original declared purpose to achieve mutual recognition between Serbia and Kosovo, as well as serving as a shield for Serbia’s authoritarian president, Aleksandar Vučić, the dialogue serves as a diversion from genuine problem- solving.

Incoming EU foreign policy chief Kaja Kallas has demonstrated leadership and vision for Europe and the wider west as Estonia’s prime minister, particularly with regard to the response to Russia’s war of aggression against Ukraine.

Advertisement

One hopes she will undertake the overdue task of making the policies of the EU and the wider west more consistent with the values of democracy and human dignity we proclaim to hold dear. She can begin by leading the west to a restoration of credible deterrence in the Balkans, and start to counter the backsliding of democracy long visible there.

Kurt Bassuener
Co-Founder and Senior Associate, Democratization Policy Council, Sarajevo, Bosnia and Herzegovina

Source link

Advertisement
Continue Reading

Business

Illegal settlements have been encouraged for years

Published

on

Neri Zilber’s piece “Far-right minister accused of politicising Israeli police” (Report, September 17) eloquently describes the crisis in the West Bank. Israel’s current government and its unsavoury allies in the settler movement stand accused, but in truth every government since 1967 has favoured illegal settlement.

The first settlements — the so-called Nahal settlements — in September 1967 were supposedly military and so did not, Israel argued, contravene international law. The west did nothing, so Israel then went ahead with brazen colonisation. When the first Oslo Accord was signed in 1993, there were in the order of 110,000 settlers in the West Bank.

A central principle of Oslo was that neither party would takes steps that would prejudice final status talks five years later. But Israel’s so-called moderate leaders, Yitzhak Rabin and Shimon Peres, immediately inaugurated the most intensive phase of settlement to date. By January 1996 settlers numbered 140,000. Rabin told his electorate not to worry — the Palestinians would not get a state. Meanwhile, Rabin and Peres accepted the Nobel Peace Prize. Butter wouldn’t melt in their mouths. The west did nothing. The Palestinians knew they had been stitched up.

So we should be under no illusions. This isn’t simply Benjamin Netanyahu and his associates, it is the long-standing thrust of the majority of Israelis across the political spectrum. Western governments have known this all along and even now appear unwilling to ensure respect for international humanitarian law as they have undertaken to do.

Advertisement

The UN General Assembly is likely to agree that the July 19 advisory opinion of the International Court of Justice, which spells out Israel’s lawbreaking in detail, must be applied.

If it isn’t, in the Middle East the killing will continue while in New York the UN may face an impasse given the unwillingness of the US and its allies to uphold the international order they themselves helped put in place.

David McDowall
London TW10, UK

Source link

Advertisement
Continue Reading

Business

Economy worries swirl after ‘painful’ Budget warning

Published

on

Economy worries swirl after 'painful' Budget warning
Getty Images Woman wearing yellow strappy sandals walking down a High Street carrying two shopping bags, one in each handGetty Images

The longest-running measure of consumer confidence fell sharply in September, raising concerns about whether government rhetoric about Budget “pain” has spooked people.

GfK’s Consumer Confidence Index had been recovering after years of rolling crises, higher interest rates and inflation gradually creeping up.

But since the end of August, it fell by seven points to -20 overall, which GfK has said does not provide “encouraging news” for the UK’s new government.

Some economists have linked the drop to officials’ warnings of a “painful” Budget at the end of August, although it is impossible to prove a link.

There were “major corrections” – or double digit falls – for consumers’ perception of the general economic situation, as well as how likely they were to make big purchases.

Advertisement

People’s view of their own personal finances in the future has also gone negative again, down nine points to -3.

Former Prime Minister Rishi Sunak had previously hailed the turn in this measure positive as a sign of an economic turnaround.

The fall was unexpected as it came in the aftermath of an interest rate cut from the Bank of England, potentially easing the pressure faced by some homeowners.

But other measures of consumer confidence have dipped too.

Advertisement

“Despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK’s new government,” said Neil Bellamy, consumer insights director at GfK.

He suggested that following the withdrawal of winter fuel payments and warnings of “further difficult decisions” to come on tax, spending and welfare, consumers are “nervously” awaiting the upcoming Budget on 30 October.

Some business leaders, such as the Labour-supporting boss of Iceland, Richard Walker, have warned the government about “doom-laden prophecies” on the economy.

When asked if “doom and gloom were overdone” last week, Chancellor Rachel Reeves told the BBC: “The latest business surveys continue to show a high degree of confidence in the UK economy because this government has brought stability back”.

Advertisement

She also spoke of how she now wanted to “unlock the huge potential” of the country.

The Bank of England Governor Andrew Bailey said on Thursday that he thought underlying confidence was rising but that consumers “want to see evidence that this is sustained”.

He also noted that rising incomes in the wake of inflation spiking had led to a “sharp rise in savings” in the last year – more than the increase in consumer spending.

The chancellor and prime minister are expected to outline a more hopeful, upbeat economic message at the Labour party’s conference next week, and at an important investment summit in mid-October.

Advertisement

But what’s clear is that this is not a government that is rowing back on the message that the Budget will contain tax rises, welfare cuts and government departmental cuts, which may prove painful for some.

Source link

Continue Reading

Business

FT Crossword: Number 17,847

Published

on

FT Crossword: Number 17,847

Source link

Continue Reading

Business

Nike boss steps down as company veteran returns

Published

on

Nike boss steps down as company veteran returns

The boss of Nike will step down next month, making way for a company veteran to take his place as the leader of the world’s biggest sportswear company amid tough competition in the retail sector.

In a statement, Nike said John Donahoe will retire on 13 October, staying on in an advisory role until early next year to “ensure a smooth transition”.

Demand for the company’s trainers has been faltering in international markets like China and the company’s stock price had slumped.

Shares rose more than 9% in after-hours trading, however, following the announcement that Elliott Hill would return to the firm.

Advertisement

Mr Donahoe was responsible for boosting Nike’s online presence, as well as driving more sales directly from customers instead of partnering with other shops on High Streets or in shopping centres.

He joined the company’s board in 2014 before taking on the role of chief executive in 2020.

His tenure has been challenging with huge shifts in the retail landscape during the pandemic and as inflation spiked in the following years.

The footwear firm has also faced tough competition from the likes of newer rivals like On and Hoka, which some analysts have described as being more innovative and on-top of current trends.

Advertisement

Nike had been hoping that new products and a marketing campaign around the Olympic Games in Paris would help bring shoppers back to the brand.

But in the announcement on Thursday, it said that the board and Mr Donahoe had “decided he will retire from his role”.

“It became clear now was the time to make a leadership change,” Mr Donahoe said, adding that Elliott Hill is the right person for the job and he was looking forward to seeing his future success.

His successor, Mr Hill, retired from the company just four years ago after serving in a number of senior leadership roles in Europe and the US.

Advertisement

He said he was “eager to reconnect” with employees he had worked with in the past.

“Together with our talented teams, I look forward to delivering bold, innovative products, that set us apart in the marketplace and captivate consumers for years to come,” he added.

Source link

Advertisement
Continue Reading

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.