Weil on Finance: What Would Carl Icahn Do?
Welcome back, View fans. Here are your morning links.
Yesterday marked the introduction of a new organization called the Shareholder-Director Exchange, complete with a curtain-raiser in the New York Times. It describes itself as “the collective best thinking of a broad group of leading corporate governance practitioners on why, how and when boards and institutional investors should engage directly with each other.” It also looks like an effort by big companies to bring activist shareholders under control. Members include institutional investors, board members and corporate lawyers. A noteworthy point from the Times article: The group has been developing “a protocol for institutional investors and board members to follow when either side wants to talk to the other.” However, “activist investors weren’t part of the group that developed the protocol.” You have to wonder why someone like Carl Icahn or Dan Loeb would feel inclined to follow it.
John Hussman sees lots of reasons to be nervous about U.S. equities.
Here are a few from the fund manager’s weekly commentary: “The latest data from the NYSE shows equity margin debt at a new all-time high. Relative to GDP, the current 2.6 percent level was eclipsed only once –- at the March 2000 market peak. In the context of the most extreme bullish sentiment in decades, and reliable valuation metrics about double their historical norms prior to the late-1990’s bubble (price/revenue, market cap/GDP, Tobin’s Q, properly normalized price/forward operating earnings, price to cyclically-adjusted earnings), we view present market conditions as dangerously speculative.”
Here we go again on the debt-ceiling drama.
Time is short, Treasury Secretary Jacob Lew said yesterday, urging Congress to act quickly to extend the government’s borrowing ability. The link takes you to Lew’s speech: “Last year, Congress passed a temporary suspension of the debt limit that lasts only through Feb. 7, which is the end of this week. After that, in the absence of congressional action, Treasury will be forced to use extraordinary measures to continue to finance the government. Let me repeat: In just a matter of days, the temporary suspension of the debt limit will end, and the Treasury Department will have to start using extraordinary measures so the government can continue to meet its obligations.” We know the drill by now. Republicans in Congress will make demands and threats. In the end we’ll avoid default. And then we’ll repeat the ritual, plus or minus a partial government shutdown along the way.
`Turning Hungarian' doesn’t have the same ring to it as `Turning Japanese,’ but it makes for a good thought in an economics blog.
Steen Jakobsen, chief economist and chief investment officer at Saxo Bank in Denmark, notes that the European Central Bank, the International Monetary Fund and the World Bank “all increased their growth projections in January” -- right before emerging markets started tanking. “Talk about an inverse indicator!” Here’s what he says to watch for in Europe now: “The thing to fear is not Japanisation, but rather Hungarinisation. Hungary has a government and policy hell bent on reducing its fiscal deficit, its methods being increased direct and indirect taxes, meddling with the independence of the central bank, under-investing and forcing its banks to pay levies in the name of securing their customers from the pain of risk taken entirely on their own devices.”
Get ready for `Sharknado 2.'
It’s official. They’re doing a sequel. This is what the world needs: Another movie about sharks raining from the sky.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
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