The Morning Ledger: A Recession On The Horizon?

Good morning. Forecasters in The Wall Street Journal’s latest survey of economists said there is a 17% chance the U.S. will enter a recession in 2016, the highest percentage in three years, the WSJ’s Josh Zumbrun reports. And 80% said they see downside risks to the economy. Falling oil prices and worries about China’s economy have walloped stock markets, leading to a volatile start to the year.

Economists, corporate leaders and Washington policy makers still say the American economy will continue to expand, but weakness abroad is heightening their worries about the pace of U.S. growth. Market volatility has also heightened the stakes for Federal Reserve officials, who are expected to keep interest rates unchanged at a meeting later this month. It has complicated the Fed’s view that a steadily improving economy and rising inflation will allow it to gradually raise rates several times this year.

“To lose the U.S. expansion, there has to be some transfer mechanism of global angst to the domestic U.S. economy,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. Falling stocks and deteriorating credit markets could do the trick, she said.


Treasurers held corporate cash positions steady in December. Corporate cash investors for the most part held their positions steady in the final month of 2015, sitting out the volatility surrounding the Federal Reserve’s first rate hike since June 2006. As has been the case in all but two of the past 24 months, allocations to corporate bonds increased, in this case by 0.29 percentage point, to represent 52.72% of all corporate cash as of Jan. 1. But that increase was the third smallest of all increases in the category last year.


Retail sales conceal encouraging detail. Friday’s retail-sales report will probably be better than the headlines suggest, writes Steven Russolillo. Items excluding cars, gasoline and building-material and garden-supply store sales are expected to rise for an eighth consecutive month. Further, Americans’ daily self-reports of spending averaged $99 in December—the highest monthly average Gallup has reported during the 6½-year economic recovery.


Fiat Chrysler, which has been enjoying strong sales gains, said it ‘believes the claim is without merit.’

Suit says Fiat Chrysler falsified sales reporting. An Illinois dealer sued

Fiat Chrysler Automobiles NV, accusing the fastest-growing of the major auto makers of manipulating new-vehicle sales reporting in the U.S. Fiat Chrysler employed a program that used “strong-arm” tactics to get dealers to falsify sales reports to benefit the auto maker by creating “the appearance that [Fiat Chrysler’s] performance is better than, in reality, it actually is,” the suit claims.

Oil rout forces companies to delay decisions on $380 billion in projects. Oil companies delayed making decisions on 68 major projects world-wide last year, bringing total 2015 deferred spending to $380 billion industry-wide, energy consultancy Wood Mackenzie said. The put-off projects indicate a development slowdown that could lead to supply constraints—and rising oil prices—years down the road.

Drop in VC funding shows growing caution. Venture-capital investment in U.S. technology startups fell by a third during the fourth quarter to $11.3 billion, the Financial Times reports. The downshift signals a new caution following a year that saw investment levels not seen since the go-go years of the dotcom bubble.

Apple may be on the hook for $8 billion in taxes after Europe probe.

Apple Inc. could be on the hook for a considerable tax bill as a result of a European Commission investigation into its tax policies, according to an analysis by Bloomberg Intelligence. Apple is under the magnifying glass by regulators who say the iPhone maker has used subsidiaries in Ireland to avoid paying taxes on revenue generated outside the U.S.

Apple suppliers feel the smartphone squeeze. Companies that make parts for

Apple are warning of lower first-half revenues, in a sign of slowing sales of the latest iPhones. The year’s first half is traditionally a slow season for Apple’s supply chain and the broader gadget industry. But this year’s slowdown could be more pronounced, with sluggish sales of the iPhone 6S and iPhone 6 Plus launched last fall, compared with the booming popularity of the iPhone 6 in 2014, said people familiar with iPhone production.

China’s Haier near deal to buy GE appliance business.

General Electric Co. is near a deal to sell its appliance business to China’s

Haier Group for more than $4 billion, according to people familiar with the matter, after GE’s previous effort to sell the unit for a lower amount was blocked by antitrust regulators.

$15 oil? It’s already here, in Canada. Most barrels of crude sold globally garner less than benchmark prices because they are deemed lower quality, or because buyers incur higher shipping costs. These ultralow prices already are forcing producers to pile on spending cuts and increase layoffs, and some analysts have suggested that the U.S. oil price could keep dropping to $20 or lower.

Brown-Forman to sell Southern Comfort, Tuaca brands.

Brown-Forman Corp. said it agreed to sell its Southern Comfort and Tuaca liqueur brands to closely held

Sazerac Co. for $543.5 million. The sale fits into the Brown-Forman’s strategy of divesting itself of challenged brands and noncore brands such as the wine business it sold in 2007.

NASA selects three firms for second round of commercial cargo contracts. U.S. government space officials said picking incumbents

Space Exploration Technologies Corp. and 

Orbital ATK Inc., along with closely held

Sierra Nevada Corp., to ferry cargo back and forth from orbit, starting in 2019. The agency said the arrangement will provide maximum flexibility in price, schedule and mission assurance.

BHP Billiton to take big charge on U.S. onshore energy assets.

BHP Billiton Ltd. said it would write down the value of its onshore U.S. energy assets by roughly $7.2 billion before tax after a sharper-than-expected downturn in global energy prices.

Nike reaches $252 million deal to extend sponsorship at Ohio State.

Nike Inc. has agreed to a $252 million deal with Ohio State University to extend its existing sponsorship by 15 years, escalating an arms race among sportswear makers and top sports schools.

Yahoo releases largest cache of Internet data. In the race among tech companies to attract top talent in artificial intelligence,

Yahoo Inc. is giving away a huge amount of data about how users interact with its services. The trove, which will be available only to universities, is expected to give researchers a rare, real-world look at how large numbers of people behave online. The data dump comes at a time when technology companies are racing to strengthen their ties with academia, particularly in areas of machine learning and deep learning, which involve training machines to mine massive data sets so they can respond to complex queries or make predictions.

>Checking in at a hotel? Hackers may be too

. Credit-card and other data for millions of guests at U.S hotels have been stolen in recent months. What keeps hackers coming back? It's not the mints on the pillow. People familiar with the attacks speculate that cyberthieves are attracted to hotels in part because frequent business travelers rack up charges on trips and may be slower to spot unusual transactions than other card users. Also, there are so many points of entry. Hotel gift shops, restaurants and front desks often maintain their own systems.

Consumers, tech vendors have a privacy gap. Americans are willing to share sensitive information with businesses in the name of safety and efficiency, a new study found. But they’re less enthusiastic about exchanging personal details in return for better advertising or offers.


Goldman Sachs says fourth-quarter earnings would be cut by $1.5 billion.

Goldman in $5 billion settlement over mortgage-backed securities.

Goldman Sachs Group Inc. agreed to pay more than $5 billion to settle U.S. and state claims stemming from the sale of mortgage bonds heading into the financial crisis. Goldman said litigation legal expenses stemming from the accord would trim its fourth-quarter earnings by about $1.5 billion, after taxes. The firm is scheduled to report results Wednesday.

Hunt’s proposed Oncor takeover rattles Texas regulators. The proposed $17 billion takeover of electric-transmission business

Oncor Electric Delivery Company by an investment group led by

Hunt Consolidated Inc. sailed through bankruptcy court last year, but the deal faces tough scrutiny in Texas. If the regulators scuttle the sale, the decision could ignite a multibillion-dollar bidding war for Oncor, a cash-generating infrastructure gem amid a bleak landscape of failed energy businesses.

French raid Renault offices in car-testing probe. France’s antifraud authority launched an emissions investigation into

Renault SA and others, Economy Minister Emmanuel Macron said, deepening scrutiny of Europe’s car industry after Volkswagen cheating revelations. Meanwhile, the president of the European Union’s development bank criticized >Volkswagen AG’s response to its emissions scandal

, as frustration mounts in EU institutions about the company’s focus on cleaning up its problems in the U.S.

Plaintiff in GM civil trial takes stand. Plaintiff Robert Scheuer took the witness stand in the first of several “bellwether” cases against

General Motors Co. related to faulty ignition switches. Robert Scheuer contends that a faulty ignition switch in his GM-made Saturn prevented his air bag from deploying after another car forced him off the road and then fled the scene in May 2014.


J.P. Morgan shares hit an all-time record above $70 in July but have declined sharply since then.
Agence France-Presse/Getty Images

J.P. Morgan posts record earnings, but can good times last?

J.P. Morgan Chase & Co.’s bankers and traders took pay cuts. Bad energy loans are piling up. And CEO James Dimon said major parts of the economy are “obviously” going to get worse. But the nation’s biggest bank by assets still posted quarterly results that beat expectations.

>Intel reports drop in earnings

. Intel Corp.’s fourth-quarter earnings fell 1% amid continued weakness in the personal computer market. Earlier this week a pair of reports said China's slowing economy, a stronger U.S. dollar and the mobile shift contributed to a sharp fall in PC sales worldwide in the fourth quarter. But the chipmaker has hopes for improved demand in 2016 based on a new family of chips, code-named Skylake, and Microsoft's Windows 10 operating system.

Clouds over tourist spots damp Burberry, Cartier sales.Swiss luxury group

Cie. Financière RichemontSA said its fiscal third-quarter sales were hurt by a decline of tourist shoppers in Europe, while London-based

Burberry Group PLC noted persistent weakness in Hong Kong.


St. Louis Federal Reserve President James Bullard, shown in an interview last year. “Inflation expectations are a key factor and if they continue to decline, I would put increasing weight on that,” he said Thursday.
David Orrell/CNBC/Getty Images

Shift in inflation expectations clouds interest-rate outlook. Investors show growing doubt that the Federal Reserve will successfully spur inflation to climb back to its 2% target after running below that level for more than three and a half years. Slower-rising inflation could prompt policy makers to lift interest rates more slowly.

China fears rattle Hong Kong dollar.The Hong Kong dollar recorded its sharpest drop against the U.S. dollar in more than a dozen years and other emerging Asian currencies tumbled Thursday, another sign of how China’s currency crisis is cascading through global markets. If China’s exchange-rate policy has seemed enigmatic in recent days, that is according to plan, people close to the Chinese central bank say.


Ametek Inc., a manufacturer of electronic instruments based in Berwyn, Penn., promoted William Burke to finance chief, effective May 15. Mr. Burke, who has been comptroller and treasurer since 2012, succeeds Robert Mandos, a 35-year company veteran who became CFO that year. Ametek didn’t immediately disclose compensation arrangements. Mr. Mandos received 2014 compensation valued at $2.2 million, including a salary of $505,000, bonuses totaling $467,861 and equity awards valued at $931,214, according to the company’s most recent proxy filing.

Isle of Capri Casinos Inc., a St. Louis-based casino operator, named CFO Eric Hausler chief executive, succeeding Virginia McDowell, who will retire in late April. Mr. Hausler has been CFO since July 2014, and previously was strategy chief since 2011 and worked as a senior vice president of strategic initiatives prior to that. Arnold Block, its operating chief, will assume the added role of president at that time. Michael Hart, its vice president of treasury and risk, will become principal financial officer. The company said it doesn’t currently intend to fill the CFO role vacated by Mr. Hausler. New compensation arrangements weren’t immediately disclosed.

First Business Financial Services Inc., a bank holding company based in Madison, Wis., named Edward Sloane CFO, effective Jan. 19. Mr. Sloane will succeed James Ropella, its CFO and treasurer, who will remain treasurer and temporarily assume the role of principal financial officer on an interim basis and will become a consultant to the firm. Mr. Sloane, most recently CFO and treasurer of Ohio-based Peoples Bancorp Inc., will receive a salary of $250,000, plus a bonus targeted at 35% of that amount, a relocation package valued at $50,000 and an equity grant valued at $62,500, according to his offer letter.


Every weekend we select a handful of in-depth articles we think are worth a bit of your valuable time, either because they peel back the layers on a compelling business story, or somehow make us look at business in a different light.

Why top companies are teaching improv. Corporate leaders are expected to act like they know what they’re doing and where the organization is heading, even in the face of uncertainty. “Things fall apart,” some guy wrote, but the executive can’t, and that’s why companies like

Alphabet Inc.’s 

Google and

PepsiCo, as well as various executive MBA programs, are turning to improv training. “Getting thrown a curveball while in training—like dancing or singing—is believed to increase collaboration, creativity, and an openness to risk-taking,” Fast Company's Vivian Giang writes.

Self-managing yourself out of a job. Online shoe retailer has seen about one-fifth of its employees leave since last March, when CEO Tony Hseih offered buyout packages to anyone not hip with his radical management system. Called Holacracy, the framework calls for the elimination of management in favor of self-organized “circles of equally privileged employees.” The New York Times reports that the latest departure came from engineers helping the Inc. subsidiary move its server infrastructure to the Amazon Web Services cloud. The “arduous, yearslong effort” is still not done, reporter David Gelles writes. Fifty out of about 130 working on the so-called Super Cloud left Dec. 31, when the buyout deadline expired. The COO tells Quartz that most of the offer-takers were managers.

Mobile first: Lenovo CEO once delivered computers on a bike. Just in time for the latest report on declining PC sales, here's a DeltaSky Magazine interview with 

Lenovo Group Ltd. CEO Yang Yuanqing. “The PC industry is still very big. It will not disappear,” he tells Mara Hvistendahl. One reason for his optimism: watching the company grow from a very small company in the late 1980s where products were delivered by bicycle to today’s more global and outward-looking company. When Lenovo acquired IBM’s PC division in 2005, Mr. Yang took his family to North Carolina to be close to division headquarters and to learn English. “Companies must be willing to take risks,” he said. “If there’s no risk there, anybody can do it, and how will you become a winning company?”

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: Get The Morning Ledger emailed to you each weekday morning by clicking here: Follow us on Twitter @CFOJournal.

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