The U.K. Fires Up the BBQ on $GOOG, $AMZN, and Other Multinationals Avoiding Taxes

“LONDON (Reuters) – Internet retailer Amazon.com Inc. will be called back to the British parliament to clarify how its activities in the UK justify its low corporate income tax bill, two lawmakers told Reuters.

Amazon will follow search giant Google, which attended another grilling by parliament’s Public Affairs Committee (PAC) over its tax affairs on Thursday. A Reuters report earlier this month raised questions over Google’s earlier assertions that its UK-based staff don’t sell to customers.

Over the past six years, Amazon has paid around $9 million in income tax on over $23 billion of sales to British clients, because it says it operates a single European business out of Luxembourg, rather than a multinational structure of independent subsidiaries in different countries, and should therefore pay tax in Luxembourg.

However, Reuters has uncovered evidence from the company’s own statements, job advertisements, statements from three suppliers and five former employees, as well as the profiles of over 140 staff on networking website LinkedIn, which suggests the UK unit has a high degree of autonomy, with local managers deciding on many aspects of its business.

The information, collected during a three-month investigation, suggests that while Amazon depicts itself as a virtual business, its structure may not be so different from its bricks-and-mortar rivals.

“The basic business model wasn’t very different to a mail order company in the 1970s or 80s,” said Mark Riley, a Business Development Manager at Amazon.co.uk between 2005 and 2008.

Bryan Roberts, Retail Insights Director for consultants Kantar Retail, said apart from the fact buyers seal deals over the Internet, Amazon’s UK unit Amazon.co.uk Ltd, which is based in an office block in Slough, near London, was essentially a UK retailer.

“Amazon.co.uk is a British business in that 99 percent of the people who are responsible for merchandising, buying, the online activity, fulfillment, are based in Slough,” said Roberts, an expert who advises many Amazon suppliers.

Amazon declined to answer any questions about its UK business.

On Thursday, the Guardian newspaper reported that it had found “extensive UK activities” for Amazon that suggested the UK tax authority could be tougher on taxing its British operations.

Companies, especially those which sell over the Internet, increasingly designate their British subsidiary as a supplier of support services to an affiliate in a low-tax jurisdiction, through which sales are then booked….”

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“Bearish sentiment toward gold has prices for the yellow metal tumbling again.

On Wednesday, George Soros revealed through a regulatory filing that he cut his gold exposure during the first quarter.

In a new note to clients, Credit Suisse‘s Ric Deverall forecasted that gold would plunge to $1,100 this year and eventually to $1,000 within five years.  This according to Bloomberg’s Maria Kolesnikova.

More from Kolesnikova…”

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“This week’s rail traffic reading showed modest improvement over recent weeks, but the longer-term trend remains negative.  Intermodal traffic was up 3.9% this week which was an improvement over last week’s reading of 2.8%.  The data, however, continues to soften on a rolling 3 month basis with the latest reading coming in at 3%.  That’s the lowest level since January.  The good news is we’re not seeing the type of consistently negative readings that tend to precede a recession.  The bad news is that the growth is tapering.

Here’s more via AAR….”

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“The market is seemingly in can’t-lose mode.

When there’s good news, stocks spike. When there’s bad news, stocks go nowhere. Lots of people say this is all the doing of the Fed, and that it’s a bubble that will end in tears.

In a great, thorough post, Josh Brown destroys the comparisons between 2013 and 1999 in utterly convincing manner.

It’s a very thorough post which attacks this comparison in multiple ways.

The simplest debunking is on valuation. Right now, he notes, the S&P 500 is earning twice what is was in 1999. And the dividends are twice as big as well:

What kind of premium, pray tell, are we paying for double the earnings and twice the dividend yield versus 1999’s market? I’m so glad you asked – turns out we’re not paying any premium at all. We’re paying a discount. 50% off. The current S&P 500 trades for a PE of 14 versus 33 for 1999. So double the fundamentals for half the price.

And he destroys the idea that there’s speculation everywhere by reminding readers what the scene was really like in 1999, for those who have forgotten:

In 1999, the S&P 500 rose by 19.5% – a good gain but you should know that the gains were extremely concentrated, more than half of the companies in the S&P were actually negative on the year! The Nasdaq 100 was up an astounding 85% in 1999, a mania for the ages, but an extremely sector-specific one. This contrasts with today, where almost every sector is now participating in the advance in a rolling, rotating, sexually undulating manner not unlike the midriff of a belly dancer….”

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“JPMorgan’s bullish analyst Tom Lee just cranked up his S&P forecast:

This has been a better bull market than we expected, particularly in 2013. But this is conforming to history—the average gain in the fifth year of a bull market is 19% (implies 1,719)….”

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“Japan’s new approach to reflating its economy – termed “Abenomics,” after Japanese Prime Minister Shinzo Abe – involves three components: unprecedented monetary stimulus, a big boost to government spending, and structural reforms designed to make Japanese industry and institutions more competitive.

These are referred to as the “Three Arrows” of Abenomics.

The Japanese government has already announced plans for the first two “arrows” on the fiscal and monetary fronts. Structural reforms, on the other hand, had not yet really come to the fore of the discussion until today.

Overnight, Abe announced some plans. Reuters has the details:

The latest tranche of Japan’s growth strategy will aim to triple infrastructure exports and double farm exports by 2020, as well as boost private investment, Prime Minister Shinzo Abe said on Friday.

The government will set a target for domestic private-sector investment of 70 trillion yen ($687 billion) annually, Abe said in a speech to business executives and academics, the level before the 2008 financial crisis and up about 10 percent from the current figure.

The details, of course, aren’t fully fleshed out…”

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“F. Scott Fitzgerald wasn’t entirely right. The very rich are different from you and me—but not by much.

A new study offers a comprehensive look at the portfolios and investment decisions of several hundred of the wealthiest families in the U.S. Every investor, rich or otherwise, can learn from how these people make the most of their advantages—and from how they mess up.

These households, with an average net worth of roughly $90 million, invest intelligently, for the most part, spreading their bets widely, seldom trading and keeping their investing taxes to a minimum.

But the superrich also commit rookie mistakes. Their approach to diversification might not always be ideal. They chase investment fads like dogs chasing parked cars. They freeze with fear just when bravery is most likely to be rewarded. Maybe the “smart money” isn’t so different from the middle-class “dumb money” that Wall Street likes to mock.

Three economists—Enrichetta Ravina of Columbia Business School, Luis Viceira of Harvard Business School and Ingo Walter of New York University’s Stern School of Business—analyzed the holdings and trades of more than 260 ultrawealthy families between 2000 and 2009. The data came from an unnamed private company that consolidates account information for the wealthy.

What have these rich investors gotten right?…”

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“The U.S. regulator overseeing the derivatives market is set to retreat from an ambitious proposal that would have increased competition in the swaps market, handing victory to large banks including JPMorgan Chase and Goldman Sachs.

The Commodity Futures Trading Commission will vote Thursday on final rules that will govern a large portion of transactions in the $633 trillion swaps market. Some derivatives are known as swaps because they “swap” risk from one party to another.

The impending regulations will determine how many prices buyers of swaps must solicit when trying to enter into a derivatives contract, the minimum size of large transactions that can be traded outside transparent trading platforms, and how trades can occur on derivatives marketplaces known as “swap execution facilities,” according to officials and agency documents.

Roughly five years after previously unregulated derivatives helped fuel the downfall of large financial institutions and led to a global financial crisis, the rules to be voted on by the five-member commission, led by Gary Gensler, Democratic chairman, represent a big portion of the government’s response to rein in risky activities under the Dodd-Frank overhaul of U.S. financial regulation, while also helping to determine the profitability of swaps trading for dealers such as Citigroup and Bank of America.

After failing to persuade a majority of his commission, Gensler conceded on the price solicitation proposal, known as “requests for quote,” or RFQ, officials said. Gensler had originally proposed that buyers of swaps such as institutional investors solicit a minimum of five quotes before entering into a swap.

But the largest global banks, including Deutsche Bank, Barclays and Morgan Stanley, fiercely objected to the five-quote minimum, according to comment letters filed with the agency. The proposal was intended to increase price transparency and encourage wider participation beyond the small number of dominant dealers in a bid to diffuse risk and lower prices for institutional investors and companies that purchase swaps to offset risk…..”

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“Tesla (NASDAQ:TSLA) just won’t (can’t) stop, apparently. Shares were up as much as 11 percent in pre-market trading on Thursday after the electric-vehicle maker announced an offering of more stock and convertible senior notes aimed at raising as much as $830 million. CEO Elon Musk put his personal brand behind the offering, stating that he intends to purchase about $100 million worth of stock directly from Tesla.”

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“Federal Reserve Vice Chairman Janet Yellen is seen by a third of international investors as the most likely to take the helm of the central bank when Ben S. Bernanke’s term ends in January.

The second-most probable choice is Bernanke himself, according to a quarterly poll of investors, analysts and traders who are Bloomberg subscribers — even though the Fed chairman has said he feels no personal responsibility to remain for another term.

Speculation about the succession at the central bank intensified after the Fed said April 21 that Bernanke would skip an annual symposium in Jackson Hole, Wyoming, because of a personal scheduling conflict. Yellen, a 66-year-old former professor at the University of California-Berkeley, has been identified by Fed watchers as a favorite, with former governor Laurence Meyer saying she has “right of first refusal.”

Yellen “has a strong record of monetary policy experience, to state the obvious, but she is also perhaps too dovish,” or overly concerned by unemployment, said David Schimizzi, senior economist at Ally Financial Inc. in Charlotte, North Carolina. “While turning off the spigots of monetary policy support immediately may not be a good idea, Yellen may push the Federal Reserve to undertake policies that could increase the risk that inflation could accelerate too quickly in the intermediate term.”

The Bloomberg poll showed 34 percent expect President Barack Obama to choose Yellen, while 27 percent predicted Bernanke and 17 percent named another candidate from a list of four other names.

Familiarity Lacking…”

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SOURCE
NYSE

NASDAQ

AMEX

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In Play,

On the Wires

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[youtube://http://www.youtube.com/watch?v=BXWvKDSwvls 450 300]

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“S&P has just downgraded the credit rating of Berkshire Hathaway to AA+ from AA.

“The lower credit rating on BRK better reflects our view of BRK’s dependence on its core insurance operations for most of its dividend income,” said S&P credit analyst John Iten.

S&P is maintaining a negative outlook on the company.

Here’s the press release from S&P…”

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“Cisco Systems (CSCO) reported third-quarter 2013 earnings of 48 cents a share, beating the Zacks Consensus Estimate of 45 cents on higher revenues and lower-than-expected operating expenses. The adjusted earnings per share exclude one-time items but include stock-based compensation expense.

Revenues

Revenues increased 5.2% year over year and 0.8% sequentially to $12.2 billion. Products (78.2% of total revenue) were up 5.5% year over year to $9.6 billion. Services (21.8% of total revenue) jumped 8.0% year over year to $2.7 billion.

Revenues decreased year over year across most of the geographies except Americas. The Americas region increased 10.2% year over year, while Asia-Pacific, Japan and China collectively known as APJC decreased 0.2% from the year-ago quarter. Europe, the Middle East and Africa (:EMEA) also declined 0.9% on a year-over-year basis due to continued macroeconomic challenges in Europe.

Product Revenues by Category

Switching (29.5% of total revenue), Collaboration (8.3% of total revenue), Security (2.7% of total revenue), and Other Products revenues declined 2.0%,1.0%, 4.0% and 41.0% year over year, respectively. NGN Routing, which accounted for 17.5% of total revenue, was flat year over year.

However, this decline was fully offset by strong performances from Service Provider Video (10.6% of total revenue), Data Center (4.2% of total revenue), Wireless (4.3% to total revenue) and Service (21.8% of total revenue) segments, which increased 30.0%, 77.0%, 27.0%, 7.0%, respectively.

Orders

Cisco’s total product orders in the quarter were up 4% year over year. The Americas region saw the strongest growth at 7%, APJC orders increased 1% while EMEA and Russia declined 6% from the year-ago quarter (consistent with broad market trends).

In the APJC region, Japan again witnessed strong growth, while China continues to see challenges related to the business environment.

Gross Margin…”

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“Just a month after gold suffered its biggest one-day drop in three decades, the precious metal has once again fallen victim to heavy selling pressure. But a tug of war between physical buyers and institutional sellers will put a floor under the precious metal, said analysts.

“The physical gold buyers and ETF [exchange traded fund] buyers have different mentalities. The physical buyers love the fact that whenever gold drops it is a buying opportunity,” Kelly Teoh, market strategist at trading firm IG Markets told CNBC.

Spot gold extended its fall below $1,400 an ounce on Thursday, declining to as low as $1,386.89 in early Asian trade. The yellow metal has lost over 5 percent in the past week.

The stellar performance of equities, softer inflation expectations, and strength in the U.S. dollar – which makes gold purchases more expensive – is pushing institutional investors out of gold in search of higher returns. This has lead to selling by exchange traded funds that are backed by physical gold.

Gold ETFs saw their largest ever monthly withdrawals in April as investors reduced their holdings by 176 tonnes, according to the Financial Times which cited Barclays Capital.

However, Teoh said, buyers of physical gold think differently. “They don’t have confidence in central banks, which are just pumping liquidity in the market [eroding the value of money]. There is no conviction in currencies. So it’s a very different mindset.”

“As a friend of mine says, gold is like a religion, you either believe in it or not,” added Teoh.

Premiums for gold bars rallied to all-time highs in major cities in Asia including Hong Kong and Singapore on Thursday after the drop in prices fueled another round of buying, limiting supply, Reuters reported….”

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“BEIJING (AP) — Global economic malaise has knocked the stuffing out of Luo Yan’s business making toy animals.

Sales of Hello Kitty dolls and plush rabbits have fallen 30 percent over the past six months, according to Luo, owner of Tongle Toy Enterprise, which employs 100 people in the southern city of Foshan, near Hong Kong. Orders from the United States and debt-crippled Europe are down 80 percent.

“We don’t talk about profits anymore,” said Luo.

China’s shaky recovery is losing steam, adding to pressure on its new leaders to shore up growth after a surprise first-quarter decline and launch new reforms to support entrepreneurs like Luo who create its new jobs and wealth.

“The current leadership is not taking this issue very easily,” said Li Daokui, a Tsinghua University economist and former central bank adviser, at a financial conference organized by investment bank CLSA. “This is their first item: Make sure the economy doesn’t slow down too much,” Li said. “Second, regenerate the enthusiasm for reform.”

President Xi Jinping and other leaders have pledged to make the economy more productive but have yet to make clear how far they will go in curbing the dominance of state industry and making other changes reform advocates say are required. It is a politically thorny challenge but reform might be driven by slowing growth and concern about tensions due to a lack of new jobs.

April factory output and investment fell short of forecasts, adding to pessimism after forecasts of an upturn in growth were dashed by the decline in the first three months of the year, though to a still-healthy 7.7 percent from the previous quarter’s 7.9 percent.

“Slow growth may trigger reform,” said Citigroup economist Minggao Shen in a report.

Potential areas for change range from allowing private competitors into state-run industries such as telecoms to making it easier for entrepreneurs to get credit from banks that now channel most lending to government companies.

Market-style reforms were a low priority over the past decade. Beijing focused on building state-owned corporate giants in banking, energy and other fields and then responding to the 2008 global crisis by pumping up government spending. But the World Bank and other advisers warn that if it fails to allow more free-market competition, annual growth could fall as low as 5 percent by 2015 — dangerously low for a Communist Party that needs rising living standards to underpin its claim to power…..”

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“MOSCOW (Reuters) – The head of Societe Generale’s Russian unit Rosbank faced up to seven years in jail for bribery on Thursday after Russian investigators released a film of him with cash piled on his desk in what several bankers said may have been a set up.

The case could increase alarm among international investors and sheds a damaging light on business practices in Russia, where SocGen is one of the few Western banks left in a market dominated by homegrown state players.

Investigators said on Thursday they had opened an official criminal investigation against Vladimir Golubkov, who was detained on Wednesday, and his senior vice president, Tamara Polyanitsyna – a final step before formally charging them.

Golubkov, 47, worked through the ranks at Rosbank to take the helm in 2008 with the task of steering the bank into profit.

“I know him to be a good man,” Garegin Tosunyan, president of the Association of Russian Banks, told Reuters. “The accusations simply don’t fit – although the law enforcement authorities are entitled to their version and to investigate….”

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“Wal-Mart Stores Inc. (WMT), the world’s largest retailer, forecast second-quarter profit that was less than analysts estimated as its shoppers struggle amid the slow U.S. economy and higher taxes.

Earnings per share will be $1.22 to $1.27, the Bentonville, Arkansas-based company said today in a statement. Analysts projected $1.29, the average of 24 estimates compiled by Bloomberg. Sales in the fiscal first quarter ended April 30 trailed analysts’ estimates while profit matched projections.

Chief Executive Officer Mike Duke has cut prices on groceries and other necessities as the chain’s lower-income shoppers deal with elevated unemployment and higher Social Security taxes. First-quarter sales at U.S. Wal-Mart stores open at least 12 months fell 1.4 percent, the first drop after six straight gains. Analysts estimated a 0.1 percent decline.

“They’re pressured by the economy, unemployment, the increase in payroll taxes, the delay in tax returns,” Bernard Sosnick, an analyst at Gilford Securities based in New York, said today in an interview. “All these negatives coalesced in the first quarter.”

Sosnick recommends buying the shares and said improvement in the economy and lower gas prices should help Wal-Mart later in the year.

The shares fell 2.9 percent to $77.53 at 7:54 a.m. in New York. Wal-Mart had gained 17 percent this year through yesterday, compared with a 16 percent gain for the Standard & Poor’s 500 Index.

Profit Gains…”

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Initial CLaims: Prior 323k, Market Expects 330k, Actual 360k ,

CPI: Prior -0.2%, Market Expects -0.2%, Actual  -0.4%, Core +1.7%

Housing Starts: Prior 1036k, Market Expects 97ok,  Actual 853k ……down 16.5%,  Building permits are up 14.3%

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