Economist 3/21/15

  1. Turkey has now endured five big terror attacks since October, at a cost of nearly 200 lives. Residents of Turkey would therefore disagree with the EU’s assessment: the country no longer feels safe for anyone.No group has stepped forward to claim responsibility for the latest bombing. The day after the attack, officials identified a Turkish member of Islamic State (IS) as the perpetrator. IS has been quick to take credit for atrocities elsewhere. But it has yet to do so for any attack by its sympathisers in Turkey.Distressingly, the list of other possible suspects has grown longer over the past year. In neighbouring Syria, Turkish-backed proxies are fighting the regime of President Bashar al-Assad, his Russian allies, and the People’s Protection Units (YPG), a local affiliate of the Kurdistan Workers’ Party (PKK).Yet the biggest threat to Turkey’s security is homegrown. An urban insurgency waged by the PKK across the country’s southeast, accompanied by a ruthless crackdown by Turkish security forces, has left more than a thousand people dead.
  2. Brexit (the prospect of Britain departing from the European Union) is a major talking point around dinner tables of Blighty, so the same must surely be true on the continent.Yet poll results from Lord Ashcroft—a Tory bigwig turned pollster—reveals a surprising degree of indifference on Europe’s mainland. Although around half of Europeans would prefer Britain to stay in the Union, over a quarter simply do not care. The apathy is strongest among women (32% are not bothered either way) and the young (30% of 24-34 year-olds).Some 20% of Austrians and 38% of Slovenians—two of the countries where apathy is at its highest—have negative views about Brits, above the continental average of 10%.
  3. UNTIL recently, America hadn’t had a spectacular corporate disaster since Lehman Brothers in 2008. But Valeant, a Canadian but New York-listed drug firm, now meets all of the tests: a bad business model, accounting problems, acquisitions, debt, an oddly low tax rate, a weak board, credulous analysts, and managers with huge pay packets and a mentality of denial. The result has been a $75 billion loss for shareholders and, possibly, a default on $31 billion of debt.Valeant’s business model was buying other drug firms, cutting costs and yanking up prices. Since 2010 it has done $35 billion of deals, mainly financed by debt.
  4. There are three lessons. First, boards matter: the managers should have been removed in October. Second, disasters happen in plain sight. Valeant issued $1.45 billion of shares in March 2015, when 90% of Wall Street analysts covering its shares rated them a “buy”.he final lesson is that “activist” investors, who aim to play a hands-on role at the firms that they invest in, have no monopoly on wisdom. Jeffrey Ubben of ValueAct and Bill Ackman of Pershing Square both own chunks of Valeant and have supported it.
  5. FOR an export juggernaut, South Korea’s recent losing streak is alarming: for 14 straight months its exports have fallen in value terms compared with a year earlier.Last year POSCO, a steel giant set up in 1968, posted its first annual net loss.This month Daewoo Shipbuilding & Marine Engineering (DSME), one of the world’s biggest shipbuilders, recorded its worst deficit on record.In January Hyundai Motor, a carmaker, reported a drop in profits for an eighth straight quarter.Other businesses are thriving despite the downturn. Seven of the ten best-performing stocks last year in the MSCI Asia Pacific Index, a benchmark followed by big investment funds, were South Korean, among them pharmaceutical, cosmetics and aerospace firms.Media stocks have been buoyed recently by the success of CJ E&M, a subsidiary of CJ Corp, another chaebol.As media firms profit from the popularity of Korean soap operas, films and music in China and South-East Asia, more are partnering with Chinese firms to produce or promote content.

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