Cargolux in a Chinese deal: What the Fortune Cookies tell us

My Orchids. Oncidium Lan Su. Photo ET

Cargolux in a Chinese deal: What the Fortune Cookies tell us

Faced with the decision to sell Cargolux with such an overwhelming unanimity, not seen since the Aztecs unanimously decided to sacrifice young women to their gods, I almost resigned. However then I found hope in my collected Chinese Fortune Cookies messages. I want of course to share with you what the future holds. Here were my questions, and FC: for Fortune Cookie answers.

• How to make sense of the decision? FC: You will have a pleasant surprise
• Why was the decision made? FC: A big fortune will descend upon you this year
• Well, not done yet. The shareholders might disagree. FC: Your dearest wish will come true
• Why not wait? FC: The early bird gets the worm, but the second mouse gets the cheese
• Will the details be disclosed? FC: Darkness is only successful when there is no light
• But will we know the truth? FC: Truth is an unpopular subject. Because it is unquestionably correct
• Will this work? FC: You have an unusual equipment for success, use it properly
• Cargolux cannot wait for commercial success. FC: China has been waiting for you for 5000 years.
• Were there other options? FC: Next time order the shrimp
• But RTL, ARCELOR, Villeroy Boch, BIL, KBL, we fear... FC: You will have unexpected good luck.

Now we have, for the record, to clearly mark down who was not in favor. That's in my understanding the small opposition parties, which in Parliament are De'i Lenk and ADR. I hope they do stay out of this. They have nothing to gain. Just for the record. The same goes of course for the government controlled shareholders. Put your name under that agreement. For the record.

Selling Cargolux for a Song

My Orchids. Cattleya Hwa Yuan Bay "She Shu". Photo ET

Selling Cargolux for a Song

In the No-man's-land between the former leaving government and the new government in the making, Luxembourg is about to make a strategic decision about the future of one of its jewels, Cargolux. Press reports indicate that a deal is on the table, and should be accepted this week.

Whereas all shareholders of the company are government controlled, no one seems to bother that the outgoing government is a caretaker government, and should not rush ahead with last minute strategic decisions. And technically, the incoming government doesn't yet exist until December 4th, and has no power whatsoever to make any decisions yet.

Both, old and new governments should explain that rush to an agreement. 

Ready, Fire, Aim

The old government went through a crisis last year because of its ill-conceived sale of 35% of CV to Qatar Airways. What seems to be the new deal with the Chinese Province of Henan is basically similar, in its rough outline, except that HNCA flies no planes (yet). According to Albert Einstein, doing the same thing over and over again, expecting better results, is the definition of insanity. The new government in formation had its Einstein moment, and wanted to understand what is going on. An "informateur" has been hauled, who, according to sources, seemed to be at first against the HNCA solution , before being in favor.

I haven't really seen what difference several days make. But for the decision making process, Luxembourg gets the "Ready, Fire, Aim Award". A very touchy national decision is taken in the political No-man's-land between an outgoing and an incoming government. No one will be really responsible, if the affair becomes another fiasco in the future. It is a good strategy though for the Luxembourg soccer team: sneak in during half-time, and score several goals while the other team relaxes in the locker room.

Selling for a song

Pun intended. Robert Song has a good deal, whatever the details are. For barely the cost of a new aircraft, he gets what he wants from a company that operates the newest fleet in the world and has 40 years of experience, and is a recognized leader in know-how. How does this improve CV's capitalization? I'm sure in the days to come we'll learn why this is such a good solution.

Do we solve a problem by simply adding a second problem?

There is no urgency. CV's profit and loss situation might even be far better than expected by the end of the year. The European pressure on Luxembourg can be answered with benign neglect.  Luxembourg has shown enough of goodwill to comply, with its QR partnership that failed.

What is interesting is the vision of solving CV's capital problem by adding another problem and obligations on the to do list with a vast startup problem in a Chinese economic development bet. Those have to be analyzed really carefully, well understood and explained. And please, show me the exits of the deal before takeoff. I already know how to fasten my seatbelt.

The Luxembourg House in New York

My Orchids. Laleia. Photo ET

The Luxembourg House in New York

On July 19, 2013, the New York Times reported this: "Big Ticket | Turtle Bay'Game Changer' Sold for $34.35 Million". What the heck, let's throw in another $650,000 for the furniture. Total $ 35 million. Of course that poked my interest. For several reasons.

First of all that price is quite a number. Across from that town house on Beekman Place is an even more perfect and nicer one. I would think that one is worth at least $50-55 million in comparison. Well, I bought that one 20 years ago for $5.6 million. Unfortunately I couldn't afford it for myself, but the Luxembourg government could. It is now the Luxembourg House in New York with its Consular offices, the Board of Economic Development, the Luxembourg Mission to the UN, and even the Luxembourg-American Chamber of Commerce. It is a famous building built by the Secretary of the Navy James Forrestal, and it was acquired then by an American National Monument who is Irving Berlin. It is where he created God Bless America, I'm Dreaming of a White Christmas, and Call me Madam.

In 1992 I knew we had a good deal, when the town house across the street, the one that sold now, came on the market. I briefly lobbied the government to allow me to negotiate a similar deal for a residence for the Ambassador to the UN, which would have been a wild 30% less than asking, which I believe was $4.5 million. The Luxembourg government passed, in favor of an existing apartment uptown.

The Qatar House of New York

The New York Times reports that: "The buyer of 21 Beekman Place, identified in city records as the State of Qatar, the sovereign Arab emirate on the Persian Gulf that Forbes has named the richest country in the world, thanks to its deposits of oil and natural gas, was so enamored of the period furnishings selected by Mr. Novello and his design team that it bought them for an additional noncommissioned $650,000. "

Yes you know, Qatar, our friends from BIL, KBL, Cargolux and more. Now we can have a street party, Christmas trees, carols, and White Christmas and all. Qatar can bring the Three Kings.

                                         

Volunteers needed

I go there from time to time, such as when I need a new passport. And I was shocked by what I saw. I knew that we had those new wealthy neighbors, and that the Grand Duke also would stop by as the recipient of the Path to Peace Award 2013. I took these pictures, with which I intend to torture your hearts and prompt you to come and volunteer to repair and clean the outside at least. 

There is that rusty and unstable fence, the soiled facade and entrance door, and, the uneven sidewalk. The sidewalk is a slip and fall trap. Do you know that Luxembourg would be liable, and that there is no diplomatic immunity, if someone falls on that sidewalk in disrepair? Let me guess for how much a New York lawyer would sue Luxembourg: $50-55 million "for pain and suffering" sounds reasonable in the New York Upper East-Side.

The deafening silence around the Cargolux "Informateur"

    My Orchids. Brassavola nodosa. The Gordian Knot. Photo ET

The deafening silence around the Cargolux "Informateur"

Don't get me wrong. That silence is a good thing. It means that the need to rush things as we were made  to believe, isn't there anymore. After all that noise, the silence is deafening, and we can finally listen to our inner heart beat. Here is what the story tells us:

1. Despite rehashing the story in Parliament again and again before the "Neiwalen", the political side still has no good understanding of what an adequate solution would be.

2. The "Informateur" may or may not have made his report to the new coalition partners on Monday of last week, as advertised. Chances are he did not, or we would know from a leak. Actually wouldn't we have gotten some official information the same day?

3. The "Informateur", Mr. Schaus' background at Bain is probably a sign that he will have had a broad investigation into the possibilities, unless his mandate was restricted to the well known short list of contenders for the government's 35% stake in the company. That would be a disappointment.

4. The rush to conclude a deal in October was not credible. And actually the pressure from the European Commission, bearing on the Luxembourg government to sell, should be encountered with benign neglect. Europe violates its big principles and rules every day, such as national budgets spinning out of control, despite the imposed 3% of GDP limitations on deficits. Can't we get a break too? I would think the Cargolux question in that respect underlies the principle of subsidiarity. Luxembourg knows best how to shape Cargolux, remote European apparatchiks don't.  The fact that the Luxembourg government just prolongs holding shares of Cargolux and thereby protects the company and its employees, is difficult to argue with. And certainly is, when considering that in the name of European compliance, Cargolux was pushed into the QR disaster. Just wait. And what about the local interests for a financial participation people keep telling me about? Are they getting ignored?

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

    On the way offshore. Photo ET

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders

A Tax Justice Network compilation, from a Latin American angle. The numbers are staggering, and though G20 gets a reputation of doing nothing, I beg to differ a bit. G20 will act more and more, because governments spend more than they take in. They need the money! However it will take a long time.

Remember how slowly they acted on global financial crimes, such as money laundering, or corruption? FATF standards, (the Financial Action Task Force of OECD), find broad acceptance today, and international pressures on tax havens have accelerated their implementation. The US Foreign Corrupt Practices Act, FCPA, and its cousin, the UK Bribery Act 2010 set standards too, that many international corporations elect to follow and comply with. It eventually will evolve into a commonly accepted standard.

The tax matters are way more complicated. The battle lines are drawn between the concepts of tax evasion and tax avoidance, between thousands of tax agents and even more tax advisers, and many ambiguities will persist and be fought out in Courts. Jurisdictions will clash, as we have seen with Dolce and Gabbana.

Eventually, everyone should have a closer look at FATCA, the US Foreign Account Tax Compliance Act, the quasi obligation for every foreign bank to comply with a long arm US regulation. Its basic unspoken premise is that a US resident, citizen and corporation are taxed on worldwide income. There is no escape. Of course any bank active internationally has to sign up through one or the other model of reporting. But here is the news: some countries elect to report for all its banks through an "Inter Governmental Agreement" with the US. Logically they should also negotiate reciprocity, unless for some reason they forgo the opportunity. However, more and more of the European countries adhere to the idea to develop mutual FATCA type agreements between themselves. The train is rolling... towards a worldwide mutual reporting world, 192 countries reporting 2 by 2!

Latin America Is The Second Region In The World With The Highest Percentage Of Tax Evaders