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Wednesday, 14 January 2015

Goldman Sachs: Watch out for energy M&A in 2015


As Shire announces that it will buy U.S. company NPS Pharmaceuticals, Richard Gnodde, co-CEO of Goldman Sachs International, discusses the outlook for mergers and acquisitions in 2015, and says this deal is an Mergers and acquisitions (M&A) in healthcare looks set to be strong again this year, Goldman Sachs said on Monday, following deal announcements from pharmaceutical giants Shire and Roche Holdings
 
And the co-CEO of Goldman Sachs International, Richard Gnodde, also said that energy—a quieter sector for activity last year—was set to shine in 2015.

Over the weekend, Shire announced it would buy the U.S.'s NPS Pharmaceuticals for $5.2 billion. This was Shire's first big move since a tax inversion deal with AbbVie fell through last year, and shares jumped in early trade on Monday before paring gains.


As Shire announces that it will buy U.S. company NPS Pharmaceuticals, Richard Gnodde, co-CEO of Goldman Sachs International, discusses the outlook for mergers and acquisitions in 2015, and says this deal is an Mergers and acquisitions (M&A) in healthcare looks set to be strong again this year, Goldman Sachs said on Monday, following deal announcements from pharmaceutical giants Shire and Roche Holdings
 
And the co-CEO of Goldman Sachs International, Richard Gnodde, also said that energy—a quieter sector for activity last year—was set to shine in 2015.

Over the weekend, Shire announced it would buy the U.S.'s NPS Pharmaceuticals for $5.2 billion. This was Shire's first big move since a tax inversion deal with AbbVie fell through last year, and shares jumped in early trade on Monday before paring gains.

Ten milligram tablets of the hyperactivity drug, Adderall, made by Shire Plc.
Goldman Sachs acted as a financial adviser to NPS Pharma regarding the deal, alongside Leerink Partners.

"It was terrific to see the market react on the Shire side in the way it did, with the stock price going up, which shows the market is really still supportive of M&A," Gnodde, who's also co-head of investment banking at Goldman, said on Monday at the bank's strategy conference in London.

"We would expect M&A broadly to continue. We think healthcare will be a big player; telecoms, again, will see a lot of activity. But then potentially even some of the sectors that were quieter last year (such as) energy—there has been so much change in the energy space, that will likely lead to some activity too."

Most-targeted industry

M&A volumes rebounded in 2014, rising 26 percent on the year to $3.60 trillion, according to financial software provider Dealogic. It marked the third-highest volume on record, behind 2007 ($4.62 trillion) and 2006 ($3.91 trillion).

Healthcare was the most targeted industry for M&A in 2014, with major deals including Actavis's $65.70 billion bid for Allergan, and Medtronic's $46.8 billion offer for Covidien.

Shire's weekend announcement saw stockbroking firm Panmure Gordon reiterate its "buy" recommendation on the Irish drug major on Monday.

Roche bid

In other news from the sector, Switzerland's Roche made a majority bid for Massachusetts-based Foundation Medicine—to which Goldman Sachs is also acting as an adviser.

Roche said it would tender for 15.6 million shares in the genomic and molecular analysis firm at $50 a share—more than twice their value on Friday—and said it would additionally invest $250 million by acquiring 5 million newly issued shares at $50 per share.

Roche shares traded around 2 percent higher on Monday after the news.
  
As Shire announces that it will buy U.S. company NPS Pharmaceuticals, Richard Gnodde, co-CEO of Goldman Sachs International, discusses the outlook for mergers and acquisitions in 2015, and says this deal is an Mergers and acquisitions (M&A) in healthcare looks set to be strong again this year, Goldman Sachs said on Monday, following deal announcements from pharmaceutical giants Shire and Roche Holdings
 
And the co-CEO of Goldman Sachs International, Richard Gnodde, also said that energy—a quieter sector for activity last year—was set to shine in 2015.

Over the weekend, Shire announced it would buy the U.S.'s NPS Pharmaceuticals for $5.2 billion. This was Shire's first big move since a tax inversion deal with AbbVie fell through last year, and shares jumped in early trade on Monday before paring gains.

Ten milligram tablets of the hyperactivity drug, Adderall, made by Shire Plc.
Goldman Sachs acted as a financial adviser to NPS Pharma regarding the deal, alongside Leerink Partners.

"It was terrific to see the market react on the Shire side in the way it did, with the stock price going up, which shows the market is really still supportive of M&A," Gnodde, who's also co-head of investment banking at Goldman, said on Monday at the bank's strategy conference in London.


"We would expect M&A broadly to continue. We think healthcare will be a big player; telecoms, again, will see a lot of activity. But then potentially even some of the sectors that were quieter last year (such as) energy—there has been so much change in the energy space, that will likely lead to some activity too."

M&A volumes rebounded in 2014, rising 26 percent on the year to $3.60 trillion, according to financial software provider Dealogic. It marked the third-highest volume on record, behind 2007 ($4.62 trillion) and 2006 ($3.91 trillion).

Healthcare was the most targeted industry for M&A in 2014, with major deals including Actavis's $65.70 billion bid for Allergan, and Medtronic's $46.8 billion offer for Covidien.

Shire's weekend announcement saw stockbroking firm Panmure Gordon reiterate its "buy" recommendation on the Irish drug major on Monday.

Roche bid

In other news from the sector, Switzerland's Roche made a majority bid for Massachusetts-based Foundation Medicine—to which Goldman Sachs is also acting as an adviser.
Roche said it would tender for 15.6 million shares in the genomic and molecular analysis firm at $50 a share—more than twice their value on Friday—and said it would additionally invest $250 million by acquiring 5 million newly issued shares at $50 per share.

Roche shares traded around 2 percent higher on Monday after the news.
 
"Markets are at much higher levels than when this M&A run started 12-18 months ago. Premiums will start to compress as the market gets to higher levels, but for the right assets you'll get good premiums," said Gnodde, who joined Goldman Sachs in 1987 and helped build the firm's European mergers and acquisitions franchise.

Goldman Sachs advised on 414 deals worth a total of $1.07 trillion in 2014, making it once again the top-performing investment bank for M&A volumes, according to Dealogic. The deals generated $2.04 billion of sales for Goldman, meaning the bank was also a world-beater for M&A revenue.

How to Become a Millionaire by Age 30

Getting rich and becoming a millionaire is a taboo topic. Saying it can be done by the age of 30 seems like a fantasy.

It shouldn’t be taboo and it is possible. At the age of 21, I got out of college, broke and in debt, and by the time I was 30, I was a millionaire.

Here are the 10 steps that will guarantee you will become a millionaire by 30.

1. Follow the money. In today’s economic environment you cannot save your way to millionaire status. The first step is to focus on increasing your income in increments and repeating that. My income was $3,000 a month and nine years later it was $20,000 a month. Start following the money and it will force you to control revenue and see opportunities.

2. Don’t show off -- show up! I didn’t buy my first luxury watch or car until my businesses and investments were producing multiple secure flows of income. I was still driving a Toyota Camry when I had become a millionaire. Be known for your work ethic, not the trinkets that you buy.

3. Save to invest, don’t save to save. The only reason to save money is to invest it.  Put your saved money into secured, sacred (untouchable) accounts. Never use these accounts for anything, not even an emergency. This will force you to continue to follow step one (increase income). To this day, at least twice a year, I am broke because I always invest my surpluses into ventures I cannot access.

4. Avoid debt that doesn’t pay you. Make it a rule that you never use debt that won’t make you money. I borrowed money for a car only because I knew it could increase my income. Rich people use debt to leverage investments and grow cash flows. Poor people use debt to buy things that make rich people richer.

5. Treat money like a jealous lover. Millions wish for financial freedom, but only those that make it a priority have millions. To get rich and stay rich you will have to make it a priority. Money is like a jealous lover. Ignore it and it will ignore you, or worse, it will leave you for someone who makes it a priority.


6. Money doesn’t sleep. Money doesn’t know about clocks, schedules or holidays, and you shouldn’t either. Money loves people that have a great work ethic. When I was 26 years old, I was in retail and the store I worked at closed at 7 p.m. Most times you could find me there at 11 p.m. making an extra sale. Never try to be the smartest or luckiest person -- just make sure you outwork everyone.

7. Poor makes no sense. I have been poor, and it sucks. I have had just enough and that sucks almost as bad. Eliminate any and all ideas that being poor is somehow OK. Bill Gates has said, "If you’re born poor, it’s not your mistake. But if you die poor, it is your mistake."

8. Get a millionaire mentor. Most of us were brought up middle class or poor and then hold ourselves to the limits and ideas of that group. I have been studying millionaires to duplicate what they did. Get your own personal millionaire mentor and study them. Most rich people are extremely generous with their knowledge and their resources.

9. Get your money to do the heavy lifting. Investing is the Holy Grail in becoming a millionaire and you should make more money off your investments than your work. If you don’t have surplus money you won’t make investments. The second company I started required a $50,000 investment. That company has paid me back that $50,000 every month for the last 10 years. My third investment was in real estate, where I started with $350,000, a large part of my net worth at the time. I still own that property today and it continues to provide me with income. Investing is the only reason to do the other steps, and your money must work for you and do your heavy lifting.

10. Shoot for $10 million, not $1 million. The single biggest financial mistake I’ve made was not thinking big enough. I encourage you to go for more than a million. There is no shortage of money on this planet, only a shortage of people thinking big enough.

Apply these 10 steps and they will make you rich. Steer clear of people that suggest your financial dreams are born of greed. Avoid get-rich-quick schemes, be ethical, never give up, and once you make it, be willing to help others get there too.

Tuesday, 18 November 2014

'Red warning lights' flashing for global economy

LONDON (AP) — The global economy's problems seem to be multiplying.

Hours after the leaders of the world's 20 most developed economies sought to boost confidence by promising to increase global output by $2 trillion over five years, Japan said it had fallen into recession.

That leaves the country — the world's third-largest economy — on a long and growing list of troubled economies. China is slowing as well, and Europe can't seem to take off.
Among major economies, only the United States and Britain are growing at decent rates, and how long that lasts depends on how much trouble their trading partners are in.

British Prime Minister David Cameron warned in an opinion piece in the Guardian newspaper on Monday that the "red warning lights are flashing" for the world economy.

Here's a look at the problems in some key economies.

JAPAN'S RECESSION

This setback was not in the plan.

Prime Minister Shinzo Abe had pledged to end two decades of stagnation with a strategy dubbed "Abenomics" that included big economic reforms and stimulus. But the economy contracted at an annual pace of 1.6 percent in the third quarter after housing and business investment dropped following a sales tax increase.

The contraction came despite predictions the economy would rebound from a drop in the previous three months.

Consumer spending is faltering as the population shrinks and grows older. Household incomes peaked more than a decade ago, and workers are increasingly having trouble making ends meet with part-time or contract work.

Manufacturers, meanwhile, have lost their leading edge in innovation while shifting production to cheaper locations offshore.

Japan's weakness could hinder growth elsewhere if its companies cut investment and buy fewer imports such as machinery, electronics and raw materials. The island nation is one of the world's biggest importers of food and the third-biggest buyer of natural gas.

CHINA'S DECLINING GROWTH

Growth in China, a manufacturing giant, is slowing — from 10.4 percent in 2010 to an estimated 7.5 percent this year. Explosive growth in China has been one of the primary drivers of the world economy for the past decade, so its slowdown is having ripple effects.

The question for Chinese leaders is how to let the country's economy slow to more sustainable growth rates without having a "crash landing." The government is trying to boost domestic spending while easing off its dependence on trade and state-sponsored investment.

Because China has strong trade links to the West, a slowdown would do some damage to the U.S. and Europe. Its massive manufacturing sector is a big consumer of raw materials, so weaker growth would particularly hurt commodity-producing countries like Australia and Brazil.

EMERGING MARKETS

China's slowdown from high rates is echoed in many other emerging markets, such as India and Brazil.

Many of these countries have benefited for years from a steady flow of investment from developed economies. Because interest rates have been at record lows in the U.S. and Europe, many investors there have sought higher yields in emerging markets, where interest rates are higher.

That is changing, however. The U.S. Federal Reserve is considering raising interest rates, which will entice some investors to keep their money in the U.S. — or withdraw it from emerging markets.

That flow of money back to the U.S. can create huge turbulence in markets. It was behind sharp drops in emerging markets and currencies in February, for example.

EUROZONE WOES

The economy of the 18 euro countries has been struggling to grow since it emerged from recession last year. It expanded by a mere 0.2 percent in the third quarter from the previous three-month period.
Its problems are compounded by the threat of deflation — when prices fall. A sustained drop would hurt growth by encouraging people to delay purchases in hopes of better deals later on.

Government debt, meanwhile, remains high among large economies like France, Italy and Britain. That means they will have to limit spending for years, potentially stymieing growth.

"National debt levels are perhaps double what they were before the (2008) crisis," said John Whittaker, an economist at Lancaster University's Management School.

The conflict in Ukraine is also raising uncertainty, leading to sanctions between Russia and the U.S. and European Union. The impact has been visible in a drop in factory orders and business confidence in Germany.

The eurozone's combined $13 billion economy is the world's second-biggest, trailing only the United States, meaning its problems cast a pall over the global economy.
___
Associated Press writer Elaine Kurtenbach contributed to this report.

Wednesday, 20 August 2014

Stock market bubble warnings grow louder



Some of the brightest minds in finance are sounding the alarm about a stock market bubble.

They aren't warning of an imminent crash, but their comments should remind investors that the current bull market -- over five years long -- can't last forever.

1. Nobel Prize-winning economist Robert Shiller: Valuations at "worrisome" levels.
 
"The United States stock market looks very expensive right now," Robert Shiller wrote in a recent column for The New York Times.
 
Shiller, a Yale University professor who is often cited as one of the most influential people in economics and finance in the world, created a metric that compares stock prices with corporate profits. The metric recently climbed above 25. That level has only been surpassed three times since 1881: 1929, 1999 and 2007.

Steep market tumbles followed each instance, including the bursting of the dotcom bubble in the early 2000s. The Nasdaq still hasn't fully recovered from that meltdown.

The Yale professor sounds bewildered by the lofty valuations for the stock market, which has nearly tripled since the March 2009 bear market lows.


But none of this means it's time to sell everything. Shiller notes that his gauge is a "very imprecise timing indicator" and said the market could "remain at these valuations for years."

2. Hedge fund king Carl Icahn believes there's a bubble.
 
"We can no longer simply depend on the Federal Reserve to keep filling the bunch bowl," the hedge fund billionaire wrote on Tumblr last week, referring to the numerous measures the Fed has taken to stimulate the U.S. economy.

Icahn described a "dangerous financial situation" that includes challenges tied to monetary policy, unemployment and income inequality.

He also said recent comments from Fed chief Janet Yellen at the International Monetary Fund "suggest, and I agree, that we are in an asset bubble."


Still, Icahn isn't calling for an imminent crash by any means. He acknowledged a bubble might not burst for "the next one, five, ten or 20 years."

It's also important to recall that Icahn currently owns billions of dollars worth of stocks. During the second quarter he even raised his stake in eBay (EBAY, Tech30) and added a new investment in Gannett (GCI). He still thinks there's value out there.

3. Ex-Treasury secretary Robert Rubin: Low rates could spark another financial crisis.
 
"The risk of excesses and the consequent instability have increased substantially," Rubin and Harvard professor Martin Feldstein wrote in an Op-Ed in The Wall Street Journal last week.

These financial luminaries (Feldstein served as chief economic adviser to President Ronald Reagan) didn't explicitly say whether a bubble already exists or if the Fed needs to hike rates now to prevent one.

However, they did advise the central bank to consider the possibility that the "excesses" caused by extremely low interest rates could "create financial crises."

Rubin and Feldstein pointed to record high stock prices, "dramatically" lower spreads on low-quality junk bonds and surging volumes of high-risk leveraged loans as alarming signs.

If hedge funds are holding assets that suddenly pop in a bubble, there's a risk of "contagion and snowballing effect" when they all hit the exits at the same time, the duo wrote.

Rubin should know about this threat. He was in charge of Treasury in 1998 when collapsing hedge fund Long-Term Capital Management imperiled the whole system. Ultimately Wall Street was forced to come to the rescue with a $3.6 billion industry-funded bailout.

Friday, 15 August 2014

Smart investors ignore the news

Chuck Jaffe

You can read the headlines, just don’t trade on them

If the market is making your head swim, you may be able to solve the problem by turning off, tuning out and dropping out of the 24-hour news cycle. 

That’s an odd suggestion coming from someone who works in the media, but what makes it doubly strange is that it’s prompted in part by the website I trust like no other, MarketWatch.com. Beyond simply being my employer, I trust the site because I know personally the quality people and journalists my fellow staffers are. 

But, last month, MarketWatch set a site record for the number of unique visitors to its news pages, which set me to wondering what kind of messages we were sending to both new and increasingly active visitors at a time when they were presumably drawn in looking for some measure of market guidance to calm their nerves or keep them on top of the financial news. 

In the old days of newspapers, I would have gone through a stack of front pages and looked at headlines. In the Internet world with its 24/7 action, that doesn’t work, because a busy news site will change its front page multiple times over the course of a day, and there’s not necessarily a record of what the site looked like with each of those changes. 

So I looked at “snapshots” of MarketWatch’s front page, one each day — just the top screen, always the first one available after 5 p.m. ET — just to see what titles would have captured the attention of an average investor seeking some guidance, perspective and outlook after the market had closed for the day. 

Here were some of the highlights, in chronological order, from July (I have removed the names of experts quoted; it’s unimportant if you actually recognize the name, but highly important that a news site wouldn’t use the name of a non-expert): 

•‘This is not an average, typical or normal bull market’ [expert] says
•Today’s bubbles aren’t like the famous bubbles of the past
•If ever the stock market flashed a ‘sell’ signal, it’s now
•‘Rotten rotation’ could signal bull market is living on borrowed time
•[Expert]: U.S. stocks will be ‘very disappointing’ for 10 years
•A stock correction is coming, then more years of gains; [expert]
•[Expert] There’s a big hole in the bull case for stocks
•We’re in the third biggest stock bubble in U.S. history
•Not much fallout from Gaza, Ukraine? Wait a year, says [expert]
•[Expert]: Great Crash of 2016, third $10 trillion loss this century
•Greenspan says bubbles can’t be stopped without ‘crunch’
•Buy-and-hold investing is impossible
•Stock bubble is ‘beyond 1929 and 2007’: economist
•Stock trader who called 3 crashes now sees a 20% collapse
•[Expert]: Wait to be uber-bearish until autumn 

That’s just 15 examples — one of them from my own column — less than half of the investing-oriented headlines that caught my eye. I would have included something from an expert suggesting a big gain ahead, but there weren’t any of those atop the pages I looked at (they could have been there at other times of day). 

It’s no wonder after a barrage of headlines like that that the first monthly measure of investor sentiment released for August — the Investors’ Business Daily Economic Optimism Index — was down sharply. 

But at a time when the round-the-clock news cycle and the ubiquity of social media makes it possible to not only read the stories but to feel like you can influence the news — or at least the thinking of others who have seen the same stories — it’s hard to believe there will ever be enough agreement between the bulls and bears to believe an overall sense of optimism. 

They’re no more likely to get together and see the situation in a remotely similar way than impassioned Republicans and Democrats would be to suddenly see key issues the same way, allowing for fast, easy progress. 

Meanwhile, if this stuff confuses the general public, it enriches the sharpies on Wall Street.
Malcolm Polley, president of Stewart Capital Advisors and co-manager of Stewart Capital Mid-Cap SCMFX +0.29% , could not have been more blunt about how the headlines are helpful to the industry, even if all they do is confuse the public. 

“To the extent that the news and information turns into crap — and that crap turns into volatility — that’s good for me,” he said. “For us, it’s information that creates a dramatic downward move in a price, where the information might be valid, or it might be misunderstood. … The knee-jerk reaction is ‘This looks bad, let’s get out,’ but that creates opportunities if you understand the situation, rather than just reacting to what you read or hear. 

“We like the information — and that there’s so much of it available — but most of it’s just noise.”
Moreover, the constant prognostications have made it so that everyone seems to think they can be a market weatherman, capable of spotting the next squall, shower or sunny day. Relying on that purported “expertise,” rather than trying to be prepared for all weather conditions is how someone finds themselves sitting inside on the sunny days or getting rained on without an umbrella during the showers. 

“The headlines and forecasts are interesting and funny, but they should teach investors to just give up on the short-term trends, because even if you are right there you’re not right for long,” said Ned Riley, president of Riley Asset Management in Boston. “I sometimes make short-term forecasts too, but I’d rather be right in the long-term.” 

In short, reading the analysis and looking at the headlines is fine; it makes you a more informed investor. 

Acting on it is where investors get themselves into trouble. 

If you’ve been changing your actions based on the news, the headlines or the websites you favor and it hasn’t been improving your investment results, it may be time to disconnect your portfolio from what you are reading and listening to. 

Said Riley: “If you get the long-term forecast wrong – if you miss out on the trend for the next few decades because you’re concerned about what could happen in the next few weeks or the few weeks after that – that’s how you wind up in real trouble. … It’s not about how many corrections or downturns you called right if all those moves don’t add up to making real money over a lifetime.”

 

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