ARM Sale Shows the Limits of British Patriotism
Date
7/20/2016 4:48:44 AM
(MENAFN- ProactiveInvestors - UK) Fuller Treacy Money, Tue
ARM Sale Shows the Limits of British Patriotism
Here is the opening of this interesting and controversial article from Bloomberg:
Anyone who cares about Europe's technology scene will be sad to see ARM Holdings become a unit of Japanese conglomerate SoftBank.
As for the U.K., it seems odd (to put it mildly) that it appears content to cede control of arguably its lone tech champion, a week after new prime minister Theresa May professed her distaste for foreign takeovers of science-rich British companies. True, it's hard to characterize SoftBank as a wicked asset stripper in the vein of U.S. drugmaker Pfizer. The Japanese have promised to keep the headquarters in Cambridge and double the number of British jobs over five years.
But it's hard to swallow the spin about this showing a Britain that remains open to business after last month's cataclysmic Brexit vote. As Gadfly colleague Chris Hughes predicted before the vote, ARM has been put in reach of overseas purchasers precisely because the post-vote sterling slump makes expensive deals look slightly less forbidding. SoftBank may well end up a benign owner with no need for dreaded synergies, but future investment decisions will probably be made in Japan, not the U.K.
And if you ever wanted an example of the kind of brains-heavy British success story that May seemed to have in mind, ARM would be tough to match. Although tiny compared to U.S. or Asian tech rivals, it's a symbol of how Europe can compete against bigger, better funded players. Born in the early 1990s, it crafted a smart business model that relies on the intellectual brilliance of about 4,000 engineers to come up with chip designs that are licensed to makers of smartphones, tablets and other gadgets.
David Fuller's view
As with marriage, one seldom knows in advance how a takeover or merger will work out over time. However, I think this article is overly pessimistic and any thought of rejecting Masayoshi Sone of SoftBank's offer would reflect a type of patriotism I do not favour.
Email of the day 1
On the best way to hold gold in the UK:
David / Eoin
I trust you are both well. Thank you very much for an excellent and insightful service.
I should appreciate your assistance. What in your view is the best way to hold gold, in the UK, for the medium to longer term other than physically or on IG Index? Your insight into this would be much appreciated.
Kind regards
David Fuller's view
Thanks for your kind words and a question of general interest.
This item continues in the Subscriber's Area.
Email of the day 2
On UK defence capabilities and Brexit:
Dear David,
Interestingly, at a 50th birthday party a month or so before the referendum, I asked a group of fathers with whom I was chatting, whether, on a percentage scale, they thought their children would have any chance of being 'called up' to serve in the defence of their country. To a man they said '0%' not 5% or 8%, but 0%... that, to me, was staggering. None of them have any military background, are professional, successful and, in my view, hugely complacent. If nothing else, history teaches us that these things are cyclical. There are many renegade leaders and renegade ideologies in the world today, while our defence capabilities have never been so weak. Do I sound like a rabid nationalist? I hope not.
As an aside, I voted 'Out'. To me, it's about democracy and sovereignty.
Best wishes,
David Fuller's view
I hope your friends are right but I agree with you. We need to upgrade Trident, with USA help, and also modernise and increased the size of our conventional armed forces. I believe Mrs May is committed to this.
Re Brexit, I agree and the most important issue for me, was whether we should continue on the journey to a single European state, or return to self-government.
Will Osborne Success Remain Clouded By His Obsession With Cutting the Deficit?
Here is the opening of this topical column by Roger Bootle, published by The Telegraph:
I hadn't expected to be assessing George Osborne's legacy quite so soon. But, to put it mildly, the past week has been full of surprises. To give him his due, Mr Osborne began with a pretty awful inheritance. The economy had been sent into the worst recession since the 1930s by the financial crash and subsequent global meltdown.
Although the previous Labour government had announced plans to reduce the deficit, when Mr Osborne took over as chancellor in 2010, it was running at over 10pc of GDP. Moreover, there was no sign of economic recovery on the horizon.
During his six years in office, the deficit has come down to 4pc of GDP, the economy has recovered and 2.4m jobs have been created. All in all, that is a pretty robust achievement.
Over and above this, Mr Osborne made serious strides in reducing corporation tax. Moreover, when a shortage of funds precluded large immediate reductions, he made some impact by pre-announcing future reductions. He even continued with this policy in his last few days as chancellor after the Brexit vote suggested the corporate sector might need some reassurance.
But there was no equivalent achievement on personal taxation. Admittedly, he took many low earners out of tax altogether, but this was paid for by increased taxes on people with higher incomes. And although he reduced the top 50p rate of tax to 45p, Mr Osborne continued with this 45p rate which, for a Conservative chancellor, should be an abomination.
More importantly, he did nothing to hold out hope for much lower personal taxation across the board, and nothing to simplify the tax system, nor to facilitate the long-overdue fusing of income tax and national insurance. If a chancellor is serious about doing the latter, he has to have a long-term plan for personal tax, and not just for the deficit.
Overall, despite his achievements on the deficit and corporate tax, I doubt whether history will deliver a particularly favourable judgement on Mr Osborne. All chancellors face a mixture of duties, temptations and distractions. The role naturally involves quite a bit of theatre and is inherently deeply political. Yet the great chancellors have concentrated on the detailed slog and the agenda for reform. The records of four successful Conservative chancellors Howe, Lawson, Lamont and Clarke provide a guide and a yardstick.
The greatest defect of Mr Osborne's chancellorship was his excessive involvement in politics and his devotion to issues concerning the management of the government and his own future.
David Fuller's view
I thought George Osborne was an outstanding Chancellor until the Brexit debate, when he allowed his personal ambition turn him into a bullying alarmist. His wild forecasts have done the economy no favours in the short to medium term and cost him his political career.
A PDF of Roger Bootle's column is posted in the Subscriber's Area.
US shale is lowest cost oil prospect
Thanks to a subscriber for this article by Ed Crooks from the Financial Times which may be of interest. Here is a section:
US shale regions that two years ago were in the middle of the cost curve for future oil supplies are now down towards the lower end.
Investments in the Eagle Ford shale of south Texas on average need a Brent crude price of $48 a barrel to break even, on Wood Mackenzie's calculations, while projects in the Wolfcamp formation in the Permian Basin in west Texas need $39.
'There are more opportunities to invest in the US, and that's where the investment will take place,' said Mr Flowers.
'If your investment options are in deep water, you've got quite a task on your hands. You might be asking: 'Should we be getting into tight [shale] oil?''
Brent was trading at $47.59 per barrel on Wednesday.
US companies that have shale oil reserves, including Chevron and ExxonMobil, have stressed the flexibility of those assets, which are developed with many wells costing a few million dollars each, rather than the multibillion dollar projects often required for offshore production.
On Wood Mackenzie's calculations, Brazil's deepwater oilfields are so large that some will be commercially viable, but higher cost regions could struggle to attract investment.
The number of large projects being given the go ahead by oil and gas companies averaged 40 a year between 2007 and 2013 but dropped to just eight last year, according to Angus Rodger, also of Wood Mackenzie.
Eoin Treacy's view
A link to the full article is posted in the Subscriber's Area.
Anyone who has ever bought a boat knows how expensive it is to run any operation on the sea versus on land. The USA has a major advantage in the fact that shale and tight oil is domestic and land based rather than in the deep water off of Africa and Latin America. The ease with which these resources can be brought on line, and potentially even refracked, means it is only a matter of time before prices get to a level which justifies the cost of renewed activity.
Erdogan's real opportunity after the failed coup in Turkey
This article by Kemal Kirisci for the Brookings Brief may be of interest to subscribers. Here is a section:
Clearly, Turkey's democracy has taken a severe blowcushioned only by the unequivocal stance of the opposition leaders and the media against the coup. Once again, the nation managed to break this pattern of ten-year coups. This offers the country a matchless opportunity for reconciliation. Granted, Erdogan has had an exceptionally rough weekend and his frustration with those responsible for or implicated in the coup is understandable. He is correct in calling 'for their punishment under the full force of the law of the land.' It will, however, now be critical that he ensure that the rule of law is upheld and rises to the challenge of winning the hearts and minds across a deeply polarized nation. He has the tools for it in his repertoire and had successfully wielded them in the pastespecially between 2003 and 2011, when he served as prime minister. In hindsight, this period is often referred to as AKP's 'golden age,' when the economy boomed, democracy excelled, and Turkey was touted as a model for those Muslim-majority countries aspiring to transform themselves into liberal democracies.
As he steers the country from the brink of civil war, Erdogan needs to rise above a majoritarian understanding of democracy and do justice to the aspirations of a public that heeded his call by pouring into the streets and squares to defeat the coup attempt. This is the least that the Turkish public deserves. This would also be a move in the right direction for Turkey's neighborhood, which desperately needs a respite from the turmoil resulting from the war in Syria, the instability in Iraq, Russia's territorial ambitions and now Brexit. This is the moment when a stable, democratic, transparent, accountable and prosperous Turkey needs to come to the fore on the world-stage. The United States needs it too. As much as the White House declared its faith in the strength of Turkey's democracy and its support for the elected leadership, there is a clear chance for forging closer cooperation between the two countries. The first step in cooperation should be in bringing to justice the perpetrators of this coup, followed by measures to enhance Turkey's capacity to address and manage the many challenges facing Turkey and its neighborhood.
Eoin Treacy's view
With mass killings in Europe, civil unrest becoming a factor in the US election cycle, wars in Syria, Iraq and Yemen, an increasingly expansionary geopolitical attitude in Russia and China exhibiting an adventurous proclivity it is easy to conclude standards of governance are deteriorating. Yet we should not forget that Argentina has a new reform minded president, India and Indonesia are led by reform minded administrations and even Nigeria is making strides towards improving conditions albeit from about the lowest base imaginable.
Email of the day on the Autonomies
Where can I find the list of autonomies on the website? I can't find the complete list...
Eoin Treacy's view
Thank you for this question which others may also have an interest in. The complete list of Autonomies can be found in the International Equity Library. The folder is located at the top of the left-most column.
Email of the day on a transcript of the last portion of my Friday audio:
I may previously have referred to my age and poor hearing. At the very end of today's audio you referred to being long but retain... discipline. Could you please repeat the important word(s) between retain and discipline?
I must say that the whole audio is a brilliant summary of the present situation.
Eoin Treacy's view
Thank you for your kind words and I'm delighted your enjoyed the Audio. The portion of the talk leading up to this piece had been discussing the yield curve spread and how it has contracted significantly but is still a fair way from becoming inverted, suggesting a US recession is not imminent. For context I thought I had better reproduce a transcript of the entire last minute of the recording.
Did Lenovo and Google Tango just hit an AR jackpot with this Pokemon Go phenomenon?
This article by Will Shanklin for Gizmag may be of interest to subscribers. Here is a section:
Put the two together and you have an amped-up version of Pokemon Go, where the monsters you're chasing know their environments. If people walk in front of the monsters, the people stay in the foreground; if the people walk behind them, the people go in the background. If there's a table in the middle of the room, the monster will walk around it instead of through it, and they'll also move around lampposts, signs or any other obstacles.
You get the idea ...
When Lenovo announced the Phab2 Pro, we thought it was an incredibly bold phone with a somewhat niche focus: things like seeing how a new couch will look in your living room, measuring objects from distance or playing with virtual pets. After Pokemon Go exploded and took over the world this week, though, this phone suddenly has the potential to go from niche to the hottest property around.
Of course this would require developer support from Pokemon Go creators Nintendo and Niantic, Inc. It isn't a stretch to imagine such a partnership, with a common connection: Until last year, Niantic was a company living under the Google umbrella (then known as Niantic Labs), and Google also creates the Tango tech that makes this AR mapping possible inside the Phab2 Pro. Surely the lines of communication have already been open on this, no?
Eoin Treacy's view
Video games are often viewed by parents as the antithesis of a productive use of a child's time. They sit motionless, while absorbed in whatever is happening onscreen and when doing something else only want to go back to playing the game. The additional sight of young people sitting side by side and texting each other rather than speaking is often something older people have great difficulty understanding.
Fuller Treacy Money