What we’re reading (9/28)
“Why Do We Think That Inflation Expectations Matter For Inflation? (And Should We?)” (Jeremy Rudd, Federal Reserve). “Economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors.”
“Here Comes $90 Oil” (CNN Business). “The V-shaped recovery in the oil patch continues to take even the biggest bulls on Wall Street by surprise. Goldman Sachs ramped up its already optimistic forecast on Sunday, calling for Brent crude to hit $90 a barrel by the end of the year. That's up from its previous call for $80. The Wall Street bank expects US crude to hit $87 a barrel, up from $77 previously.”
“Are Investors Becoming Warier Of Chinese Assets?” (The Economist). “If investors expect Chinese policy to continue to be volatile, then they could start to demand an additional risk premium for holding a swathe of assets. ‘The intensity of policy change has caught investors off guard,’ says Chetan Ahya of Morgan Stanley, a bank. ‘It’s not clear to investors what the end game is for each sector, so there’s a lot of uncertainty, and it’s this uncertainty that adds to the risk.’ Indeed, a risk premium may already be becoming apparent for some assets.”
“Activist Hedge Fund Starboard Has Big Stake In Huntsman” (Wall Street Journal). “Activist hedge fund Starboard Value LP has a more-than-8% stake in Huntsman Corp. and plans to agitate for change at the chemicals producer, according to people familiar with the matter. Huntsman has a market value of roughly $6.3 billion, making Starboard’s stake worth around $500 million or more. Huntsman, based in The Woodlands, Texas, makes chemicals for a variety of uses including plastics, cars and construction materials. The exact changes Starboard intends to push for to improve its stock performance couldn’t be learned. Huntsman’s shares are little changed since the company’s 2005 initial public offering, closing Monday at $28.07 versus $24.50 on their first day of trading.”
“Goldman Sachs, Ozy Media And A $40 Million Conference Call Gone Wrong” (New York Times). “When YouTube learned that someone had apparently impersonated one of their executives at a business meeting, its security team started an investigation, the company confirmed to me. The inquiry didn’t get far before a name emerged: Within days, Mr. Watson had apologized profusely to Goldman Sachs, saying the voice on the call belonged to Samir Rao, the co-founder and chief operating officer of Ozy, according to the four people.”
