Berkshire Hathway is buying Wesco Financial. Warren Buffett is taking his partner Charlie Munger's firm completely private. It seems to be a departure from typical Berkshire acquisitions, as Wesco has no durable competitive advantage and currently clocks an ROE that's less than the 10-year Treasury yield. Maybe Mr. Buffett likes the float from the reinsurance lines so much he's willing to pay a premium (38 P/E!!) for a lackluster, no-growth business.
AOL buys Huffington Post for $315mm, but founder and namesake Arianna Huffington only gets something like $18mm. Founding principals typically get way more than 5.7% of the takedown at liquidity. I think her early backers took her to the cleaners. She should have asked former gubernatorial rival Arnold Schwarzenegger for advice.
It finally dawns on The Economist that TIPS are not reliable as a way to discount against inflation. Individual bonds probably aren't as they don't reset their principal often enough to account for daily price changes in a high-inflation environment. A TIPS bond fund or ETF on the other hand would be subject to routine daily price discovery. Hmmm, looks like TIPS turn the traditional bond roles - stabilizing a diverse portfolio and providing cash flow - upside down.
Chinese manufacturing has a long way to go to catch up with the U.S., says an editorialist. Here's my editorial response. The gap will close rapidly as manufacturers realize they'll have to relocate to China to keep rare earth metals in their supply chains. Our only hope is to develop technologies in the U.S. that aren't rare earth dependent. Hope is not a method.
Speaking of China, they just raised interest rates again. They really are serious about fighting inflation and revaluing the yuan on their own terms. The after-hours announcement will probably make the SSE and SZSE open lower on Wednesday. Don't hold your breath; after all, this headline isn't a crystal ball.