As TNT went, so goes Toll? Japan Post’s 50% premium (plus 13 cents-a-share dividend) bribe to Toll shareholders to take the money and sell will make a lot of people rich — none more so than former Toll managing director and current Essendon chairman Paul Little, who will have considerable bragging rights over many other business people involved in AFL (eat your heart out, John Elliott). But let’s hope the deal has more success — in the long term, especially — than the last big transport deal in this country; the $2 billion buyout of TNT by privatised Dutch post office, KPN, in 1996. But 18 months later, in June, 1998, TNT Post Group was divorced from KPN, creating a new entity focused on mail, express, and logistics, leaving KPN purely a telecommunications firm. That’s because the management of KPN wanted to concentrate on the rapidly growing telecoms business and needed the capital, which meant TNT, with its lower growth outlook, would have to be pushed out into the big wide world on its own, again. — Glenn Dyer

Normalising Crown’s slump. No matter how much James Packer and his beancounters at Crown Resorts “normalised” the December half-year results to remove distortions caused by big-spending high rollers and other volatile items, the figures delivered this morning couldn’t disguise the damage from the downturn in Macau caused by the Chinese government’s graft crackdown and several lesser factors, such as a smoking ban. Net profit fell 47.2% to $201.8 million thanks to the slide in gaming revenues in Macau during the six months (and it has continued into January). Crown’s 33% owned associate Melco Crown operates two casinos in Macaua (and just opened a new gambling den in Manila, which got a lot of free publicity from compliant media outlets), and its contribution to the Crown Resorts profit plunged more than 42% to $85 million in the latest half year. Crown was unable to “normalise” that dramatic fall in Melco Crown’s contribution. There were a further $61 million in other costs and impairments, some of it relating to the failed Sri Lankan casino play. Crown’s board declared a steady interim dividend of 18 cents a share, with Packer, who owns 50.1% of the company, to receive a handy $50.6 million. The steady dividend tells us the actual (lower) profit was a more accurate portayal of Crown’s performance in the six months than the “normalised”‘ figures. The “normalised” net profit rose 2.3% to $322 million, considerably more than the actual profit of $201.8 million. It’s not hard to see which figure was emphasised. — Glenn Dyer

Those were the days. Remember when Seek.com, Carsales.com.au and Wotif.com were the companies that had weakened Fairfax by stealing much of their classifieds and the “rivers of gold” (along with REA Group)? Well, REA Group is still going strong, and 62% owned by the Murdoch clan’s News Corp. Wotif has disappeared, taken over by a larger offshore competitor, and Seek and Carsales have lost much of their “hot” internet glamour, and are now mature online-based stocks, subject to the same sort of scepticism about the sustainability of their business model, revenue and earnings as more old-fashioned industrial stocks. Seek’s share price rose 2.7% yesterday, after an 8%-plus fall on Tuesday in the wake of a 9% lift in interim earnings and a higher (up 36%) dividend. Carsales released a record half-year profit and the shares fell sharply in early trading, but rebounded in the afternoon as the wider market recovered and rose. In fact, they were down more than 6% at one stage before they rebounded to end the day down 0.8%. Results like those from Seek and Carsales used to bring soaring share-price gains, but the two are now well-established companies in mature markets and facing pressures from the mundane — such as the level of unemployment, retail sales, consumer confidence, real wages and disposable income, not to mention corporate profits and expectations. Just like Fairfax Media. — Glenn Dyer

Despite the cold, US doves say rate talk too warm. Much of the US midwest and north-east may be shivering under record snow and ice, but that hasn’t stopped players in the financial markets from warming to the view that US interest rates are about to rise — and soon. That belief has upset emerging market currencies and bond markets (but not sharemarkets, where new highs have been hit in recent weeks — including Australia, Japan, Europe and the US. Not even the ructions in Greece, have been enough to undermine the burst of confidence in equity markets). For many, the fact that US rates are going to rise was a given. Well, no longer.

In Washington this morning, around 6am our time, a big bucket of cold water was poured over the belief the US Federal Reserve will be raising interest rates sooner, rather than later. The minutes of the last Federal Open Market Committee meeting in late January showed a more members were more cautious about lifting rates than previously thought. In fact, some US commentators said it was a victory of the doves. The minutes said more officials wanted rates left where they are (at their 0.0-0.25% level, which has been in place since December, 2008) “for a longer time”, than those who wanted an earlier move. “Many” said a premature rate hike would harm the recovery, while only “several” thought a later move would risk high inflation, according to the minutes of the meeting in late January, reported at Marketwatch.com.

Now, the Fed minutes don’t tell us exactly how many of the 17 Open Market Committee members preferred one position or another. The minutes use terms like, “a number,” “several,” “many,” “some” and a “few”  to describe the level of support for various policy positions. And the importance of understanding the use of those terms came in the minutes’ conclusion after a lengthy discussion about the timing of the next interest rate decision: “many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time.” In other words, don’t bank on rates rising soon — perhaps not until the end of this year, or even early 2016. The doves had the numbers. US 10-year bond yields led the way lower, dropping a rather large 0.06 points — from 2.14% yesterday morning, to 2.08% this morning. — Glenn Dyer

US economy feeling deflation’s chills? Perhaps the overriding factor in the Fed’s discussions was the impact of the sharp fall in oil prices and whether that would have a lasting impact on inflation and consumer activity — the jury is still out on that one, it seems from the minutes. And, overnight, the Fed and many others in the markets received a timely reminder about the impact of that oil price fall on US inflation with the biggest fall in wholesale prices recorded in the current series — down 0.8% last month. It was the third monthly decline in a row. That left the annual rate at zero, a big fall from the 1.1% annual rise in 2014. Even the core measure fell 0.3%, and has risen by just 0.9% in the past year. Next week’s Consumer Pride Index data for January will also be negative and no doubt lead to warnings about the rising risk of deflation in the US economy — but not quite yet. But when you add disinflation to weak nominal wage growth, some members of the Fed and many external economists worry that it will take much longer for core and headline inflation to return to the Fed’s 2% target; meaning the need for a rate rise is not so pressing. That’s why the fall in oil prices and weak price pressures elsewhere in the economy will keep US rates lower for longer, even as the jobs’ market continues to improve. — Glenn Dyer

Peter Fray

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