These are stories Report on Business is following Wednesday, Feb. 27, 2013.
Cisco studies Canada
The chief executive officer of Cisco Systems Inc. appears to love Canada, so much so that he’s considering investing in what he calls “the easiest place in the world to do business.”
Of course, there’s more at play here, primarily his failed attempts to change the U.S. government’s mind on how it taxes companies and the amount of money they hold outside the country.
But, hey, if John Chambers wants to put some of that $46-billion (U.S.) to work here, it’s okay with us.
Mr. Chambers said in an interview with The Financial Times that he was studying the possibility of investing part of Cisco’s cash in Canada and Europe, having given up on pressing the U.S. government on double-taxing repatriated cash.
The chief of the tech giant did not say where or how the cash could be used, only that Canada and Europe would be “likely” targets and that the move could be soon, according to the business publication.
“In terms of our overall approach we’re going to go wherever the start-ups are and where the governments are that really want us,” Mr. Chambers, in Barcelona for a conference, told The Financial Times.
“The easiest place in the world to do business is Canada. Their prime minister gets it. They make it easy for me to invest and do acquisitions there; they have a great education program and they have a great immigration policy.”
- Financial Times (subscription): Cisco looks to invest in Europe and Canada
- Careers: ‘Transformation’ guru takes Cisco from the server room into the boardroom
Apple faces shareholders
And on the subject of cash mountains, that’s certain to be an issue at today’s annual meeting of Apple Inc. shareholders.
Apple’s, of course, is huge, a bit more than $137-billion (U.S.), and the company is under attack from hedge fund chief David Einhorn of Greenlight Capital, who has sued the tech giant, pushing for new preferred shares with dividends.
“Investors over the past few years have seen the stock only going up during a series of very successful product introductions,” Michael Obuchowski, a portfolio manager at North Shore Asset Management, told Bloomberg News.
“Now there are a lot of questions being raised about Apple’s future, and with good reason.”
Business investment projected to rise slowly
Canadian businesses plan to boost their investments by just 1.7 per cent this year, and may well rekindle the debate over “dead money” with the smallest increase since the recession.
Public and private concerns, along with the residential real estate industry, expect to spend $398.2-billion on construction, machinery and equipment this year, Statistics Canada said today in an annual survey.
“This would be the smallest increase since the economic downturn in 2009,” the federal agency said, The Globe and Mail's Tavia Grant and Richard Blackwell report.
“The main contributor to the slowdown is an anticipated decline in investment reported by the mining and oil and gas extraction sector,” it added.
“Declines are also anticipated in the information and cultural industries as well as in educational services. Strong increases in investment were reported in the utilities sector and in transportation and warehousing.”
Bank of Canada Governor Mark Carney has urged Canadian companies to invest, or return to shareholders, what he calls “dead money” that is sitting unused.
Of note is that spending increases by the public sector, at 5 per cent, are forecast to outpace those of the private sector, at 0.8 per cent.
Also noteworthy is that investment in the mining and energy sector is forecast to actually decline, by 2.7 per cent, in the first drop since the recession. This is largely because of a pullback in Ontario, to the tune of more than 30 per cent, and British Columbia, by almost 26 per cent. Spending in Alberta is forecast to remain flat, while Newfoundland and Labrador would see a gain of almost 83 per cent.
Investment in housing is projected to rise 0.2 per cent, which would mean the industry would represent more than 26 per cent of all spending.
"While the survey isn’t a precise estimate of future spending intentions as plans may change through the year, it has been a decent barometer of overall trends in investment recently, and suggests that the Bank of Canada’s hope for a 'rotation' in growth from housing to exports and business capital spending is going to face at least a one-year gap, since housing is already slowing," said chief economist Avery Shenfeld of CIBC World Markets.
- Canadian business to hold back on investing this year
- 'Dead money' may be smart approach, report says
- Free up 'dead money,' Carney exhorts corporate Canada
Fitch warns on U.S.
One of the Big Three credit-rating agencies says time is running out for the United States to secure its triple-A status, The Globe and Mail's Kevin Carmichael reports.
London-based Fitch Rathings said today that the U.S. is on track to rack up debt that is “inconsistent” with a ranking among the dwindling number of countries deemed certain to repay their debts.
Fitch’s intervention comes at a crucial time. On Friday, across-the-board spending cuts worth $85-billion (U.S.) over the remainder of the fiscal year will be set in motion unless Democratic and Republican leaders find a compromise. There are few signs an agreement is in the offing.
- Fitch says U.S. rating at risk as spending cuts deadline looms
- Barrie McKenna's Economy Lab: Governments pile on debt in good times and bad. 2013 no different
Caisse return almost 10 per cent
The Caisse de dépôt et placement du Québec posted a return of 9.6 per cent last year, boosted by a strong performance in global equity markets in the second half of 2012, The Globe and Mail's Bertrand Marotte reports.
That beat the giant fund manager’s internal benchmark of 9.3 per cent and fell within the pension fund median for 2012.
Signs of economic recovery in the United States, China and some emerging markets helped equity markets close out the year on a positive note, offset by weaker Canadian stocks in the underperforming materials and energy sectors, the Caisse said today.
Streetwise (for subscribers)
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- Governments pile on debt in good times and bad. 2013 no different
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- Don't call me a dove: Bernanke defends QE3
ROB Insight (for subscribers)
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