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Friday, 22 August 2014

BREAKINGVIEWS

Duke Energy

Dynegy's $6.25 bln grab marks return of ambition

22 August 2014

The U.S. power company once tried to buy Enron and eventually went bust after a spat with activist Carl Icahn. Two years out of bankruptcy, Dynegy is roughly doubling its business with two deals. They look sensible, but the lesson from the past is to avoid getting carried away.

The European Central Bank (ECB) President Mario Draghi speaks during the monthly news conference in Frankfurt, February 9, 2012.

ECB deserves to lose market’s inflation confidence

22 August 2014

Euro zone inflation is moribund. Investors are increasingly doubting Mario Draghi’s ability to boost it, according to normally quiescent market signals. That’s quite right, given how ineffectively monetary policymakers are addressing the problem.

A student graduating from Harvard's Business School holds a U.S. flag with a dollar bill

BofA's FIRREA-swallowing act causes indigestion

21 August 2014

Regulators are using the obscure law with longer deadlines to extract hefty penalties, including a record $16.7 bln from BofA. Even Countrywide’s Angelo Mozilo seems in their grasp. Aggrieved investors may be appreciative but it’s a dubious way to make up for a missed crackdown.

President of the European Central Bank Mario Draghi and U.S. Federal Reserve chair Janet Yellen speak before the G20 finance ministers and central bankers family portrait during the IMF/World Bank 2014 Spring Meeting in Washington April 11, 2014.

Central banks should forget about inflation

21 August 2014

When they talk in Jackson Hole, central bankers will undoubtedly fret about prices. It’s a waste of time. Inflation and deflation rates are too low and stable to be a threat. The monetary authorities have more important worries: debt, reserves and managing rate rises. 

An employee carries a wafer box in a clean room of German semiconductor manufacturer Infineon in Regensburg February 12, 2013.

Infineon's $3 bln buy relies on profit margin hike

21 August 2014

The German semiconductor company is paying a rich 48 pct premium to snap up International Rectifier. The fit is complementary: its U.S. peer’s strength is chips that consume less power than the typical Infineon product. But top-notch execution is required.

An employee counts Chinese 100 yuan banknotes at a branch of Bank of Communications in Shenyang, Liaoning province July 6, 2012.

Stock-based bank pay one reform China doesn't need

22 August 2014

Bank of Communications’ goal of compensating staff with shares sounds like progress. But as long as China’s lenders are state pawns, it’s unlikely that bosses will have much influence over valuations. At worst, dysfunctional banks with glum management could be the unhappy result.   

Hertz rental cars

Hertz gears up for another financial spin

21 August 2014

Carl Icahn is the latest to buy into the struggling $14 bln car rental firm. Over nearly a century, automakers GM and Ford, an airline, a 1960s conglomerate, private equity and the public have owned Hertz. It’s a perennial investor plaything. Maybe Uber could even be next.

Stephen A. Schwarzman, Chairman and Chief Executive Officer of The Blackstone Grou

Blackstone finds way to outsource skin in the game

21 August 2014

The private equity firm’s latest securitisation would normally require it to keep 5 percent of the risk. But Blackstone has found a way to outsource its equity sliver to other investors. The structure looks acceptable – but investors should be wary of copycats that might not be.

A man uses his mobile phone to take pictures outside a China Mobile shop in Xiangfan

China Mobile's foreign foray risks meagre returns

21 August 2014

The dominant Chinese operator is using its $73 bln cash pile to hunt for growth overseas. The strategy has failed to create value for other telcos. Expansion may help to push Chinese technology, but rival governments may be wary about allowing China Mobile to take control.

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Features

Martin Hutchinson

Great Recession has spawned weak economic thinking

22 August 2014

Post-2008 navel-gazing has produced some doubtful notions. Thomas Piketty’s excessively popular wealth theory is one. Others are a déjà-vu fear of stagnation and overdone hopes for monetary policy and regulation. Maybe another year’s Jackson Hole gathering will debunk them.

Stephanie Rogan

Review: Paul Ryan changes delivery but not direction

22 August 2014

“The Way Forward,” by the U.S. congressman and former VP candidate, is more campaign manifesto than memoir. Ryan’s rhetoric has softened but his harsh policy proposals haven’t. The title is accurate in at least one way. His austerity ideas probably will guide Republican strategy.

Dominic Elliott

Equity research revolution fails cost-benefit test

22 August 2014

The UK market watchdog wants fund managers to pay for stock analysis themselves instead of using client money. Pricing is opaque at best, and investors need protection. But the change could favour big banks and hike funding costs for smaller companies. Evolution is better.

Columns

Edward Hadas

Edward Hadas: Time to retire unemployment

20 August 2014

The world’s central bankers are discussing “labour market dynamics” at this week’s annual Jackson Hole conference. A good place to start is with the most widely-used monitor, the unemployment rate. It is well past its sell-by date. A “bad job index” would serve a better purpose.