Buffett buys a railroad
Warren Buffett's Berkshire Hathaway Inc. struck its biggest deal ever this morning, a $26-billion (U.S.) takeover of Burlington Northern Santa Fe Corp. Why does Mr. Buffett, the Oracle of Omaha, want with a railroad? "It's an all-in wager on the economic future of the United States," he said. "I love these bets." The way Mr. Buffett sees it, railroads will grow as the United States grows, and more people will move goods over the course of the next three decades. The deal – $100 a share in cash and stock for the 77.4 per cent of the railroad Berkshire doesn't already own – is boosting railroad stocks in premarket trading. Read the story
Britain shakes up its banking sector
A shakeup of Britain's banking sector sent jitters through the markets this morning, raising fears again over the stability of the global financial sector. The country's two biggest lenders, Royal Bank of Scotland and Lloyds Banking Group, are selling big chunks of their branches and key units. The moves are necessary to settle issues with European Union antitrust regulators over receiving government aid. Both banks, once global European champions, are partly owned by the British government. The moves are significant. Lloyds announced a record share issue of more than $22-billion (U.S.), and said it would pull out of the government's insurance program for bad debt. RBS will sell parts of its retail network and insurance arm, and scale back its investment banking unit. Both have agreed to curbs on bonuses. Lloyds is also selling branches. Another huge charge booked by UBS AG of Switzerland also spooked the markets. RBS chief executive officer Stephen Hester said the bank feels "bruised by what we've had to go through." Read the story
Oops, they did it again
Australia, which surprised the markets a month ago with the first interest rate hike among major economies, boosted rates by another quarter of a percentage point today, hiking its benchmark rate to 3.5 per cent. The Reserve Bank of Australia, though, sent a signal that it may not hike again at its next meeting in December. While today's rate hike could be seen in some quarters as putting the heat on other central banks to follow suit, that scenario is unlikely. The Federal Reserve begins a two-day meeting today, with its policy announcement Wednesday, followed by the European Central Bank and Bank of England on Thursday. Those central banks, in far different positions than their Australian counterpart, which never saw a recession during the global slump, are far from tightening monetary policy at this point.
There has been some speculation in markets that the Bank of Canada could follow Australia, given the similarities of the Canadian and Australian economies. But that's not likely to happen. More likely is that Bank of Canada Governor Mark Carney will, all things being equal, stick to his promise to keep rates at historic lows well into next year.
"While Australia and Canada both have a vast supply of commodities, the similarities stop there," Scotia Capital economists said in a note this morning. "For one, Australia's major export market is Asia, with about 20 per cent of its exports heading to China, while only 5 per cent are exported to the U.S. And, the IMF just raised its Chinese GDP projection for 2010 to 9 per cent. Canada, on the other hand, sends 75 per cent of its exports to the U.S. with only 3 per cent heading to China. This means Canada is more heavily exposed to our double-dip fears and only faces about a 3 per cent expansion in economic activity in the U.S. in 2010." Read the story
Ferrari aims for China markets
China's fortunes certainly are changing. The emerging economic powerhouse has been forging ahead on all fronts, buying resources around the world and putting its stamp on several industries. Now, Ferrari, the luxury car unit of Fiat, says China should become one of its top five markets within a few years. Marco Mattiacci, its Asia-Pacific CEO, told the Reuters news agency today Ferrari is marketing to the ever increasing ranks of China's wealthy, planning to sell about 600 cars a year over the next five years. The U.S. is still its biggest market, but, Mr. Mattiacci said, China is rich with potential.
Eastern Europe hit hard
Bit by bit, Europe is emerging from recession, though its eastern nations largely remain troubled. A European Union forecast this morning noted that Poland will be the lone EU country to escape a recession, while Estonia, Latvia, Hungary and Lithuania will be hit hard. The projection also noted that, but for Estonia and Bulgaria, the eastern countries will rack up budget deficits above the EU's mandated 3-per-cent level.
Lookahead: U.S. factory orders for September will be reported at 10 a.m. ET.
Talisman hit by tumbling energy prices
Tumbling energy prices continue to hit the oil patch. Talisman Energy Inc. said this morning its third-quarter profit fell 98 per cent to $30-million or 3 cents a share from $1.43-billion or $1.38. Given that the Calgary-based energy company's business is fairly evenly split between oil and gas, it was hit by both lower oil prices and collapsing natural gas prices. Revenue fell to $1.54-billion from $2.66-billion.
Addicted to the Internet
As technology evolves, so do our afflictions. Bloomberg News reports this morning that Rome's Policlinico Gemelli hospital has opened a new clinic to treat Internet Addiction Disorder, or the obsessive need to be online. The symptoms - anxiety and depression when not logged in, among others - were first identified by psychiatrist Ivan Goldberg in the mid-1990s. Now, there are similar centres in the U.S., China and Japan, one close to Microsoft's headquarters in Washington state. "Many of the patients have interpersonal problems: They don't talk to their neighbours and hardly go out, but are online all night to chat with someone in, say, Nepal," one of the psychologists at the Rome clinic told the news agency.
From today's Report on Business
CanWest-Goldman battle erupts
www.theglobeandmail.com/globe-investor/canwest-goldman-battle-erupts/article1348821/
Manufacturing on the upswing globally
www.theglobeandmail.com/report-on-business/crash-and-recovery/manufacturing-on-the-upswing-globally/article1348829/
U.S. slump batters auto making in Canada
www.theglobeandmail.com/report-on-business/us-slump-batters-auto-making-in-canada/article1348825/
H1N1 could hamper Canada's economic recovery
www.theglobeandmail.com/report-on-business/h1n1-could-hamper-canadas-economic-recovery/article1348843/