A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
There's still a lot to look into despite a market environment that even Goldman Sachs describes as "challengingly boring." First up, CNN reports that the $786-billion (U.S.) in U.S. merger and acquisition activity so far this year has almost eclipsed the full year total for 2007.
The merger boom is great news for investment bankers and investors holding the stock of acquisition targets but also carries some negative implications. Stock-heavy deals are an indication that CEOs are aware their stock prices are inflated, and in some industries the takeouts suggest there's no other way to increase profitability.
"Boom time for mergers and acquisitions" – CNN Money
The New York Times presents a theory that overall debt levels in the developing world are hugely inflated by tax evasion. The story cites the work of (another) French economist who calculates there is more $7-trillion stashed away in tax havens like Switzerland and Luxembourg.
I don't dispute the theory at this stage, but it's a bit convenient for Thomas Piketty fans on one side of the political ledger – I'd like to see more evidence and discussion. In the end, I agree with former New Jersey senator Bill Bradley's belief that the best tax policy has "the lowest rates and the fewest loopholes."
"The True Cost of Hidden Money" – New York Times
Also from the New York Times, a study highlighted by Andrew Ross Sorkin alleges an epidemic of U.S. insider trading. Mr. Sorkin writes, "A quarter of all public company deals may involve some kind of insider trading, according to the study by two professors at the Stern School of Business at New York University and one professor from McGill University."
"Study Asserts Startling Numbers of Insider Trading Rogues" – New York Times
Quartz reports that China's corporate debt market is now the largest in the world, surpassing the ever-growing scale of the United States private debt market. This shouldn't come as a huge surprise since, as FT Alphaville's David Keohane notes, companies are issuing debt without having to worry about paying it back.
"Mr. Qiao admits the Yuncheng heating project will not provide any returns for his company, an unsettling fact for any investor. But he is dismissive that this is the problem.
'All of our investments are public works that should actually be paid for by the local government so when the trust product matures the government should take this project off our hands and give us the money to repay investors,' he says. 'Don't worry, it is impossible for there to be any sort of financial crisis here in Yuncheng.'"
Alrighty then. Sounds perfectly sustainable to me.
"Chinese companies have racked up $14.2-trillion in debt" – Quartz "Those Chinese trusts have been awful quiet" – FT Alphaville (registration, but not subscription required)
See Also: "China May FDI falls by most in 16 months as economy slows" – Reuters
Tweet of the Day is also China-related. Formerly China-based economics professor Patrick Chovanec responds to reports that China's recent lossening of credit is showing results with, "If by 'results' one means propping up econ stats by extending the overinvestment binge that is choking China'a economy ... yeah. Results." – Twitter
Diversion: "Former U.S. military aircraft designer explains why the F-35 is a waste of $1-trillion in taxpayer money" – Gizmodo
Follow Scott Barlow on Twitter at @SBarlow_ROB.
Scott Barlow