What’s notable about 2014?
2014 was a year of War and Peace. First, there were the personalities: Activists Bill Ackman and Carl Icahn declared a truce in their long fight over Herbalife; Amazon’s Bezos and Hachette books buried the hatchet over e-book pricing; Warren Buffett and Coca-Cola’s chief smoothed things over after the CEO’s bonus was cut in half. It needed to be: Buffett owns 10% of Coke, and the company hasn’t done so well. But hundreds of millions in bonus bucks couldn’t put Humpty together again at PIMCO. The Bond King—Bill Gross—lost his heir—Mohammed el-Erian—and then lost his Kingdom when he was pushed out.
Then there were the corporate tax-inversions. That’s where a US company merges with a foreign firm to move its tax-base offshore. Comedian Stephen Colbert likens them to an adopting a minority child and then claiming yourself as the child’s descendant. The list: Burger King / Tim Horton’s; Mylan / Abbot; Medtronic / Covidian; Salix / Cosmo; Nabors / C&J. Several proposed deals didn’t forward. The US Treasury’s fought the inversions with new rules. These may slow the pace of firms moving out, but they sure won’t bring new companies in.
Finally, there were the surprises: a price war in crude oil and a 40% drop in prices; a war on deflation in Europe led to lower long-term interest rates; North Korea hacked Sony Pictures; a third year of double-digit US stock market returns. But Argentina—in spite of a debt default and currency crisis—had the strongest local stock market of the year, rising 60 percent. Even in USD terms it’s up over 20%.
Source: Trading Economics
Predictions for 2015? That’s easy: expect the unexpected.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!