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HEARD ON THE STREET: Daily Digest 1,633 words 14 December 2012 09:53 Dow Jones Global Equities News

DJI English (c) 2012 Dow Jones & Company, Inc. HEARD ON THE STREET: Netherlands Grapples with New Dutch Disease

By Richard Barley The Dutch and German economies are closely linked by trade, geography and history so closely, in fact, that the guilder was effectively pegged to the deutschmark as long ago as 1983. But now Germany's economy is already well above its pre-crisis peak but the Netherlands is languishing. The Dutch central bank has slashed its expectations for 2013 and forecasts a contraction of 0.6% of GDP, even as the Bundesbank predicts a return to growth. What has gone wrong in the Netherlands? Like Germany, the Netherlands is a major exporter; it runs a large and consistent current account surplus. Its government debt level is lower than Germany's and both have strong fiscal track records. It is having to implement austerity, but not on the scale of southern Europe: the budget deficit is forecast to be 4.1% of GDP in 2012. Yet in the last quarter, Dutch GDP plunged 1.1% on the quarter, while Germany eked out 0.2% growth. Some of the weakness might be temporary and related to poor euro-zone import demand; the Netherlands is a major European trade hub. But there are two key structural problems: the Dutch housing market and Dutch pensions. Dutch house prices have fallen some 16% from their peak in 2008 and are expected to fall further; over half of households in the 2534-year age group have negative home equity, Fitch notes. Dutch households are the most indebted in the euro zone, with household gross debt at 250.5% of disposable income in 2011 versus 86.3% in Germany, according to Eurostat. Meanwhile, pension contributions are rising while pension payouts are falling. Over 20102013, purchasing power for employees will have fallen by 3.75%, for benefit recipients by 4% and for pensioners by 5.25%, the Dutch CPB Bureau for Economic Analysis estimates. With unemployment rising, all of this is clearly hurting consumption. That underlines the lingering problem many advanced economies still face: high stocks of legacy debt. Policy efforts have understandably focused on reducing debt service costs and keeping credit flowing, avoiding a sudden stop in financing. But only time, growth or restructuring can address legacy debt. For the Netherlands, that means it may be many years before it can once again compare itself favorably to Germany.

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HEARD ON THE STREET: No Stopping China's Energy Hunger

By Duncan Mavin For years, China's allowed foreign investment on its own terms -- give us your capital and expertise in return for minority, non-controlling stakes. Now, the tables may be turning. Canada concocted a twisted compromise last week to accommodate $20 billion of bids by China's Cnooc and Malaysia's Petronas for Canadian companies while blocking similar takeovers in the future. The move smacked of the sort of protectionism that often arises when Asian state-owned companies come calling for western assets. Canada already ranks worse on openness to foreign direct investment than all G10 countries other than Japan, according to the OECD. The new, more restrictive guidelines will reinforce that position, notes Royal Bank of Canada analyst Sue Trinh. In reality, though, fat-walleted Asians are not easily put off western-owned oil and gas assets. Days after Canada's new FDI edict, PetroChina has struck a deal to invest $2.2 billion in a joint venture with EnCana to develop the Duvernay shale project in Alberta. Earlier this week, PetroChina agreed to pay $1.63 billion for BHP's 10% stake in Australia's Browse national gas project. Those deals attract less political heat joint ventures and minority positions without control are perceived as a lesser threat than full-blown takeovers. The positive terms for the sellers are numerous too. For starters, western governments can extract significant concessions from the SOEs Cnooc and Petronas have both made promises to Ottawa on staffing and governance for instance. Also, the Asian SOEs have deep pockets. PetroChina's paying 9,817 Canadian dollars ($9,983) per acre for its stake in the EnCana JV, about ten times the average 2011 price for similar transactions, notes Bernstein Research analyst Neil Beveridge. Moreover, the support of Asian SOEs can make or break the economics of some projects. Australia's Browse is technically difficult, expensive to pull off and has been in the planning stages since the 1990s. With PetroChina now on board, one of Australia's largest gas projects looks that much more likely to be developed, notes Bernstein's Mr. Beveridge. Policy contortions designed to keep SOEs at bay may seem like a waste of energy. But getting foreigners to pay richly to develop domestic assets is the sort of smarts China has used to great effect. HEARD ON THE STREET: Sprint Isn't Yet in the Clearwire

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By Miriam Gottfried Sprint Nextel (S) hopes to add to its airwaves. But the spectrum it aims to buy may keep it grounded. The No. 3 Clearwire more, its leverage. U.S. wireless carrier offered $2.1 billion to acquire the 49% of (CLWR) it doesn't already own. While it may end up having to pay status as the only natural Clearwire buyer gives it negotiating And Sprint does need additional spectrum.

More concerning, though, may be added investment needed to put that spectrum to use. Clearwire's spectrum has higher capacity than other swaths but requires greater cell-tower density to provide high-quality coverage. That isn't a problem in urban areas. But Sprint will likely need to invest in more towers outside major cities at a time when capital expenditures on its nextgeneration network are already running high. Using 2012 consensus estimates for Sprint and Clearwire, the combined entity would have $4.6 billion in earnings before interest, taxes, depreciation and amortization and $5.6 billion in capital expenditures. In 2014, after Sprint's current major capital project has ended, the combined entity would have Ebitda of $6.9 billion and capital expenditures of $4.8 billion. But the added expense required to put Clearwire's spectrum to use in less densely populated areas could significantly cut into operating cash flow, according to Sanford C. Bernstein. Of course, this doesn't take into account potential costs cuts as Sprint absorbs Clearwire's administrative functions. And Softbank Chairman Masayoshi Son, whose company is buying a 70% stake in Sprint, appears prepared to endure a period of financial pain to realize his vision of turning Sprint into a stronger player. But investors may not have the same kind of patience. HEARD ON THE STREET: Shaken Stocks Aren't So Stirring

By Justin Lahart With year-end approaching, the annual ritual of totting up which stocks did best and which did worst is just a few weeks away. But it might also be worth considering which ones jumped around the most. Volatility is generally bad news for watching stocks gyrate can interfere of the price they are buying at, and sell there is more of a risk it will investors, and not just because of how with sleep. Investors can't be as sure if a situation arises where they must be at a deep discount.

Take shares of solar-panel maker First Solar, which started the year at $33.76, closed as high as $49.03 in early February, fell to $11.77 in June and most recently traded at $31.55. Investors who hung onto the stock all year got taken on a wild trip that left them right about where they started. Given how much First Solar shares swing around on any given day, though, it

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can't have taken these investors long to get a sense of what they were in for. Annualized volatility of First Solar's shares has been 77.4%, making it this year's most volatile stock in the S&P 500. It is followed by watch maker Fossil, at 70.7%, and Netflix, at 70.2%. Annualized volatility for the S&P 500 itself is a much lower 12.6%. These companies have little in common with one another save that they share uncertain futures. To try to forecast how things will pan out for First Solar, for example, one must consider what competition from China will look like, how regulations and government subsidies will evolve, and the competitive threat from low-cost natural gas in electricity production. Fossil's future, meanwhile, depends on how well it can keep time with the vicissitudes of fashion, as well as the global appetite for luxury goods. And Netflix must secure content from companies wary of the Internet video company undermining their business, as well as face down competitive threats from behemoths like Apple and All of which makes the shares of First Solar, Fossil and Netflix closer to all-or-nothing bets than for most stocks. Hence, small changes in how investors see the world can make for big changes in the three companies' stock prices. Meanwhile, information-technology stocks, which used to be among the S&P 500's most volatile members, don't jump around like they used to. Where once they were seen as big bets on what the future might look like, now they are something more humdrum. Apple even started paying a dividend this year. Still, tech isn't quite as humdrum as Johnson & Johnson, the S&P 500's leastchoppy stock with annualized volatility of just 9.7%. Its stock is up only 7.7% this year, against 12.8% for the S&P 500, but its shareholders have probably slept better than most. Subscribe to WSJ: [ 14-12-12 1553GMT ] 4257 Document DJI0000020121214e8ce000p5 Search Summary Text Date Source Company Subject Industry Region Language sprint AND earnings In the last 3 months Top Biz/Financial News All Companies All Subjects All Industries All Regions All Languages

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