10.6.14: Splitting Up, Bailing Out and Endorsing Obamacare

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Today and Tomorrow in Business

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Good Monday afternoon. Reaction to the big split of Hewlett-Packard into two companies dominated the news cycle, and it wasn't all good. Wal-Mart's new insurance comparison site could refresh sales, but it's also a booster shot for Obamacare. Your morning cuppa could get very expensive soon, now that a drought in Brazil has nearly doubled the price of coffee beans. And Hank Paulson dropped a courtroom bombshell: He asked China to help bail out troubled banks in 2008.

Getting Smaller to Get Bigger
Perhaps the best way to look at HP's move -- and similar splits by eBay, IBM, Nokia and many more -- is that the market rewards those who get smaller so they can get bigger in a more-focused way. To that end, Hewlett-Packard Enterprise, the name of the new corporate software-and-services company, could drop another shoe very soon, possibly by merging with data-storage company EMC. Monday's cryptic statement -- that it is holding off on a stock buyback because it has "material nonpublic information" -- is a sign HP is about to make an offer or has received one. Investors approved the move, yet some tech writers weren't so optimistic. "The growth prospects for either company aren't much to get jazzed about," writes Bloomberg Businesssweek's Ashlee Vance. The software business remains lackluster, the company's cloud-computing play is just getting going, it completely missed the transition to mobile computing and it lacks a blockbuster product to fuel sales. Other than that...

Wal-Mart Endorses Obamacare (Kinda)
The world's largest retailer is moving heavily into health care, the Washington Post reports. Beginning Oct. 10, Wal-Mart is joining with DirectHealth.com, an online health-insurance comparison site, to allow shoppers to compare coverage options and enroll in Medicare plans or the public exchange plans created under the Affordable Care Act. The strategy is another step into insurance marketing as the retailer tries to use its mammoth size to expand beyond food.

Morning Joe Jumps
Now that Starbucks has us all thoroughly hooked on caffeine, get ready to dig deeper into your pocket to support your habit. Coffee futures prices have almost doubled this year because of a severe drought in Brazil. The lack of rainfall has clipped output from the world's biggest coffee grower and fueled worries about how already-weakened trees will fare next season. Brazil supplies a third of the world's coffee.

Paulson's Bombshell
Hank Paulson, the former U.S. treasury secretary, testified in court that he spoke to China about helping bail out financial firms in 2008. Paulson, in court as a witness in the trial over the fairness of the AIG bailout, said the Chinese were very nervous in 2008, but weren't interested in a deal without the U.S.'s guarantee, an assurance the government couldn't provide. Testifying later this week: Timothy Geithner and Ben Bernanke, the bailout's other architects.

Diversity Pays
Gender diversity in the workplace leads to greater productivity yet may also reduce satisfaction among employees. So says a new study that analyzes one large U.S. white-collar company's "social capital" -- levels of cooperation, trust and enjoyment of the workplace. Homogeneous offices have higher levels of social capital (translation: they're more comfortable around each other) yet they perform less well financially. "Diversity, Social Goods Provision, and Performance in the Firm," appears in the Summer, 2014 issue of the Journal of Economics and Management Strategy.

NBA's Media Deals
Fending off threats from rivals Fox Sports and NBC Sports, Walt Disney's ESPN and Time Warner's TNT renewed their contracts to carry National Basketball Association games through the 2024-25 season. They are tripling payments to the league and locking in coveted live sports programming even before the other networks could bid. The NBA will receive $24 billion over nine years. It certainly puts Steve Ballmer's $2 billion purchase of the Los Angeles Clippers into perspective.

Nothing says "globalization" more than today's sale of New York City's Waldorf-Astoria to Chinese insurer Anbang Insurance. The nearly $2 billion price-tag is the largest-ever for a U.S. hotel, Bloomberg News reports, and continues a surge of Chinese investment in New York real estate. Current owner Hilton Worldwide Holdings will continue to operate the careworn art-deco hotel, once the favorite of movie stars and diplomats, for the next 100 years.

Remember Greece?
After four years of austerity, the Greek government is turning the page with tax cuts and benefits in a draft budget that forecasts a return to growth. The economy, which has shrunk by a quarter since 2008, is expected to grow 2.9 percent in 2015, buoyed by an increase in consumption, tourism and exports this year, after contracting 3.9 percent in 2013. Next year's estimated deficit will be only 0.2 percent of GDP, pretty close to balance and a minor miracle for the country.

Top This
Say hello to the baconification of America. In the past decade, bacon has grown into an industry generating more than $4 billion in annual sales. It has moved from a breakfast meat to a food trend touching an incredible array of consumer goods, from bacon-heavy fast-food burgers and bacon-infused desserts at fine restaurants to bottles of bacon-distilled vodka and even a sexual lubricant formulated to smell (and taste) like bacon. More than cupcakes, ramen, or kale, bacon has become the defining food trend of a society obsessed with food trends.

And Don't Forget
  • Keep an eye out for downgrades (and possibly a surprise upgrade for the U.S.) in tomorrow's World Economic Outlook from the IMF, which tries to project the economic future of the major advanced and developing nations. Olivier Blanchard, the fund's chief economist, will explain it all in a 9 a.m. news conference in Washington.
  • Three economic heavyweights are speaking tomorrow: Federal Reserve Bank of New York President Bill Dudley at the Rensselaer Polytechnic Institute in Troy, New York; U.S. Treasury Secretary Jack Lew at the Peterson Institute for International Economics in Washington; and German Finance Minister Wolfgang Schaeuble speaks at the 25th anniversary of the fall of the Berlin Wall.
  • And the Bank of Japan will announce its monetary-policy decision at the end of a two-day meeting in Tokyo.

Enjoy your evening. Be sure to follow me on Twitter (@paulaEdwyer) and send comments or suggestions my way (pdwyer11@bloomberg.net).

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editors on this story:
James Greiff at jgreiff@bloomberg.net
James Greiff at jgreiff@bloomberg.net