Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area. 

“The L’Oréal stake could be divested via an exchange offer for Nestle shares that would accelerate efforts to optimize its capital return policies, immediately enhance the company’s return on equity, and meaningfully increase its share value in the long run,” said Third Point, which retained former Sara Lee Corp. Executive Chairman Jan Bennink to advise on the investment.

A L’Oréal spokeswoman declined to comment.
Consumer companies have become popular targets for activist shareholders. In 2015, billionaire hedge fund manager Bill Ackman amassed a $5.6 billion stake in snack giant Mondelez International Inc. and called for management to improve the company’s performance, leading to cost cuts. Procter & Gamble Co. attracted Nelson Peltz’s Trian Fund Management LP, which revealed its position in the consumer-products maker in February and has since amassed a stake valued at about $3.3 billion, according to its latest regulatory filing.

Loeb is aiming high with Nestle as activist investors enjoy a resurgence of client inflows and returns. Third Point’s flagship fund gained almost 10 percent in the first five months of 2017, part of an industrywide rebound that saw event-driven funds return 5.6 percent on an asset-weighted basis, the most among the main strategies tracked by Hedge Fund Research Inc.

 

Eoin Treacy's view

Nestle has a large number of businesses and, in order to remain competitive, needs to reorient itself towards growth sectors in its largest developed markets. It is interesting however that the thrust of the activism is towards highlighting the significant cross ownership Nestle has in other European companies. 

1. Will it really happen?
It’s been a long time coming -- the tax was first proposed in 2006 -- but in April, India’s president cleared the final procedural hurdle by signing off on some GST-related bills. The last flurry of activity will include rolling out the tax’s technological backbone (known as the GST Network) and training around 58,000 tax officers. Some companies want more time to ready for the new regime, but the government is sticking to its timetable.

2. What’s so good about the new tax?
Those 17 or more state and federal levies on everything from electricity to Gucci handbags complicate efforts to sell products to India’s population of 1.3 billion (about four times bigger than the U.S.). Under the current system, a product will be taxed multiple times and at different rates. In another change, the GST will apply to goods at the point of consumption, rather than where they are produced. That will reduce the cascading effect of taxes, allowing producers to easily claim credits and minimizing the opportunity for corruption.

 

Eoin Treacy's view

Many of the issues India faces are of its own making, so simplifying the sales tax structure is a major endeavour which should have a significant positive impact on both trade and investment. Many observers have commented on the slow pace of reform during Modi’s administration but this is a landmark piece of legislation which highlights the scope of the government’s ambition to push through meaningful economic change. It also potentially suggests to the electorate that Modi will need a second term to deliver more of what people want. 

The diplomatic route that is being pursued by Donald Trump, as it was by his presidential predecessors, is not going to work. China is never going to take actions tough enough to force Pyongyang to give a “victory” to the US-led coalition.

Secondly, because the consequences of another war in Korea, even if brief and limited, would not be catastrophic for Americans... only for Koreans, and perhaps Japanese.

Thirdly, US willingness to act so decisively would convey the strongest possible message to a potentially much more dangerous would-be nuclear power, Iran, to forget the whole idea and behave.

Fourthly, foreign adventures are a classical method for national leaders to divert attention from political difficulties at home. “Trump, facing ever-expanding scandals, continually-low polling numbers, and even potential impeachment proceedings, may decide that a pre-emptive strike on North Korea is worth the costs and consequences,” Micah Zenko writes in Foreign Policy.

Much-respected analyst George Friedman of Geopolitical Futures concludes that the US continues to be “on the path to war.”

The US is not likely to unleash an attack until it has a casus belli, or a challenge from North Korea that it can point to as a defensible cause for going to war.

That hasn’t happened yet. But the situation could change very quickly if the US becomes convinced that the North has developed intercontinental ballistic missiles. Sudden falls in the South Korean and Japanese stock-markets would be an early warning of pending military conflict.

 

Eoin Treacy's view

A link to the full report is posted in the Subscriber's Area.

North Korea currently has three US hostages which it is undoubtedly hoping will be a deterrent to a US military strike. That may prove to be a vain hope if it persists in pursuing development of an intercontinental ballistic missile. Simple maths would suggest the lives of millions of possible US casualties outweigh the near certain death of three. 

Eoin Treacy's view

The Chart Seminar 2017 

Our remaining venue for the 48th year of the seminar are:

London November 16th and 17th TBA

If you are interested or would like to suggest a venue please contact Sarah at [email protected]  I would be more than happy to plan a US based seminar this year if we have the critical mass to make it viable .

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.