Susan Kelly's story today on how value-added taxes can trip up multinationals in emerging markets is yet another example of the tax challenges facing companies seeking to exploit growth opportunities in the developing world. There's more to say about that in light of the IBM case we discussed on Friday. In fact, multinational have to be prepared for radically different tax environments from one emerging market to the next.
We can't help feeling as if we're stuck in a financial and economic version of the movie in which weatherman Bill Murray keeps living the same bad day over and over again because of his mistakes. But if the bad karma on display in that 1993 film provided amusing popular entertainment, the financial/economic rendition of Groundhog Day is preventing growth and stability in the real world.
Today's developments remind us that the devil's especially in the details when it comes to journalism. Just peruse the headlines and you'd think that corporate earnings couldn't be better, that Obamacare is freshly doomed, that Goldman Sachs did not lose $1.3 billion in currency trading in its most recent quarter, and that its back to business as usual with Iran.
Well, not exactly.
Nowhere is the financial world's obtuse insularity more strikingly in evidence than in its repeatedly mistaken prediction that interest rates are about to soar, which it has made for, oh, about five years now, or more or less since the end of the financial crisis. And that fact that its been made since the crisis ended says a lot about the problem.
All the hoopla over the Twitter IPO on Friday makes me nervous. Yes, it's great for investors that that the stock soared by 70-plus percent in first-day trading, never mind the naysayers, including yours truly. The problem is that IPO mania is invariably a sign that the stock market is entering dangerously high territory.
The stock market has hit a five-year high, a mark that puts the financial crisis and ensuing recession in the rear-view mirror, far enough, certainly, to make one think the economy is firmly back on solid ground. But the Financial Times reminded us on Sunday that U.S. business investment is still below 1991 levels, even though it has rebounded from even lower depths.
Macro concerns have given way to micro ones for CFOs, as audit season approaches. Just in time, the PCAOB warned late last week that deficiencies in companies' internal controls were on the rise. And our first story today by Hilary Johnson lays out the problems in detail. But the rise in deficiencies doesn't surprise is, as its in line with the backlash against regulation we're seeing in such legislative efforts as the JOBS Act, which, however well intended, will in our view inevitably lead to serious corporate accounting problems.
Goodbye government shutdown, hello currency war. At least that's the shift in focus we expect CFOs of multinationals to perform as last week's political crisis gives way to economic realities facing the rest of the world as well as the U.S.
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