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Hi Christine, here's the news you need to know for December 13th. Reading time is 3:17 minutes.
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â Finimize'd over a Pingado at Sampa Coffee, 75 Leather Lane, London, UK. |
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Oil Prices Keep Climbing |
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Whatâs Going On Here?The price of oil keeps going up after eleven major oil producers announced they would join OPEC (a formal group of oil producing nations) in cutting oil production in 2017. The oil price hit its highest level since the summer of 2015! (tweet this) |
What Does This Mean?Eleven major oil producers not affiliated with OPEC, including Russia and Mexico, have agreed to cut their collective oil production in 2017 (remember, less supply is positive for the price). Together OPEC and these eleven oil producing nations (in a rare show of cooperation) have agreed to produce 1.8 million fewer barrels of oil every day in 2017, representing almost 2% of the worldâs daily oil production! If they donât cheat on the agreement, this should be a big deal. |
Why Should I Care?The bigger picture: Higher oil prices will likely be a negative for most major economies â although the US could benefit.
Britain and Europe have to import oil, so a higher oil price is usually bad news for their economies overall (as it means more money leaves the country). The US, however, is a big oil producer â so the higher price is more likely to give a boost to its economy (especially in oil-producing states like Texas). However, in both Europe and the US, a higher oil price means higher prices for gasoline â leaving less money in peopleâs pockets to spend on other things.
For markets: Energy companies are lovinâ it.
Of course, companies that produce oil are usually pretty happy when the oil price goes up, and the spike in prices has benefitted the likes of BP and Exxon. The stock prices of US-focused oil drillers, like EOG Resources and Anadarko, have moved even higher than more internationally focused companies, since a higher oil price should lead to a significant pickup in US production. Thatâs because, over the past few weeks, the oil price has jumped above the âbreak-evenâ price of production for many US firms. |
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CBS-Viacom Deal Is A No Go |
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Whatâs Going On Here?Viacom and CBS will not merge together (again) to make a media supergiant â and it means that Viacom will have to find its own path to growth as the traditional cable company struggles in the age of Netflix and Hulu. |
What Does This Mean?Viacom separated from its then-parent company, CBS, in 2005 with the idea that the high-growth media company, anchored by well-loved channels like Comedy Central and MTV, would thrive as a separate, more nimble entity. But just the opposite occurred: Viacom has floundered since the spinoff, while CBS has been among the best-performing major US media companies.
Earlier this year, National Amusements, the controlling shareholder in both companies, suggested that Viacom could be turned around by a merger with its former parent CBS. But Shari Redstone, the President of National Amusements, backtracked on that plan on Monday, instead putting her hopes in the forward-looking vision of Viacomâs new CEO. |
Why Should I Care?For markets: CBS didnât seem enamored with the idea of joining forces with Viacom.
Redstone may have given her public backing to Viacomâs new CEO, but markets arenât really buying it. It seems more likely that CBSâs CEO, the venerable Les Moonves, balked at letting troubled Viacom back into CBSâs fold. Markets are hinting at the same idea: shares in CBS were flat on Monday, while Viacomâs were down almost 10% â clearly, investors are disappointed that the former golden child wonât be brought back under its parentâs roof.
The bigger picture: A âcontrollingâ shareholder can make the successful management of a large corporation difficult.
Viacom (and to some extent CBS) have been marred in 2016 by a public feud between company executives and the companyâs most important shareholder, National Amusements. While National Amusements doesnât own the majority of the companiesâ shares, it controls the voting rights (i.e. it is the âcontrolling shareholderâ), which gives it a lot of control over corporate management (such as choosing the CEO). The conflict highlights the downside of shareholders relinquishing their voting rights (which recently took place at Facebook). |
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#FINIMIZEQUOTE
âItâs easy to be miserable. Being happy is tougher â and cooler.â
- Thom Yorke (an English musician best known as the singer and songwriter of Radiohead) |
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Nepomuk asked:
âIs it possible that the European Central Bank (ECB) will run out of bonds to buy?â
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âIn theory, yes the ECB could run out of bonds to buy â but governments could also issue more bonds, so the available supply could easily increase. Additionally, just last week the ECB removed a previous limit on the price it would pay for bonds (based on what yield those bonds are offering). This makes it even less likely that the ECB will run out of available bonds to buy. Â A restriction the ECB could run up against is one limiting the amount of bonds it can buy from each country (which is based, loosely, on the size of the country). For example, itâs already close to that limit with Portuguese bonds. However, the ECB could conceivably change this rule as well. Overall, while it is possible for the ECB to run out of bonds to purchase, it seems unlikely right now.â
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WHAT WE'RE READING
A look at how private equity amasses wealth by taking a deep dive into Hostess, the maker of Twinkies: Read More |
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