Buyout shops rebalance reality and myth in valuations 29 Feb 2008 Alternative managers are set to revalue private holdings more often as public markets move. KKR s publicly listed fund just marked several assets down. Investors should welcome more information, but could also see more volatility. That might change how they view private equity.
Peloton blow-up signals dark days ahead for hedge funds 29 Feb 2008 The UK hedge fund was scuppered by a bad trade, tougher bank financing terms and the leak of its rescue plan. Peloton is unlikely to be the only fund caught out this way. But if it s any consolation to investors, Peloton s partners have lost everything too.
How did a firing offence become AIG’s business strategy? 29 Feb 2008 Banks dismiss traders for selling far outofthemoney puts. Those positions can potentially wipe a firm out. The credit exposures AIG just marked down by $11.2bn look pretty similar. Insurers say they manage fattail risks better than traders. It s not clear they do.
Should private equity fear the Democrats? 29 Feb 2008 Aside from a rash of protectionist rhetoric, there s a good chance of a tax grab next year that takes in buyout firm and hedge fund pay. But a clampdown is possible whoever wins the White House and maybe in the UK too. That s because it so patently makes sense.
Buffett blunt as usual, except on Gen Re 29 Feb 2008 The Sage of Omaha s annual missive takes US home lenders to task and slams politicians squawking over foreign investments in the US. Perhaps not surprisingly, it s rather quiet on legal woes at Gen Re although Buffett s recent charm offensive helps ensure he won t get tainted.
Will Wilbur whip Warren in monoline war? 29 Feb 2008 Messrs Ross and Buffett are both pushing into the bond insurance business. Buffett s offer to reinsure monolines muni business at exorbitant rates only roiled Berkshire Assurance s rivals. Ross s investment in Assured Guaranty could be a more effective play for market share.
Public spending threatens India’s economic growth 29 Feb 2008 Indian public spending in 2007 was up 24%, with another 18% rise expected this year. Food, oil and fertilizer subsidies push up spending, worsening India's trade deficit and distorting the economy. If world financial markets get tight, India is headed for big trouble.
Close’s failed auction looks bad news all round 29 Feb 2008 All four of the UK bank s bidders have walked away. That s grim for shareholders, who have lost out on a bid premium, and embarrassing for managers, who rejected an offer last year. Funding looks to have been the stumbling block which doesn't bode well for other bank deals.
Is Fannie Mae starting a liar loan business? 29 Feb 2008 Move over, Ninja. The US mortgage giant is offering overburdened borrowers unsecured loans to pay off their arrears, based partly on verbal confirmation of ability to pay. It s billed as helping stretched homeowners, but Fannie's bottom line might gain most for now.
Hedge funds race to defuse leverage time bomb 29 Feb 2008 Peloton was laid low partly by leverage that was too aggressive for its creditors. The LTCM debacle in 1998 had similar features. Hedge funds have so far avoided blowups on the scale of Wall Street s losses. But that could change if they fail to scale back borrowing.
JPMorgan Cazenove union starts to creak 28 Feb 2008 Robert Pickering, the CEO, has resigned after profits slipped 11%. Boom times may have helped mask the cultural gap between the two banks their first few years together. But as markets feel the squeeze, JPMorgan will probably increasingly exert its will.
Rentokil loses chairman, searches for future 28 Feb 2008 The UK services company has lost track of its City Link parcel delivery business, which will be lucky to break even in 2008. Chairman Brian McGowan will leave before the AGM in May. The once highflying company now looks totally lost. A splitup or takeover may be in order.
Swiss and Luxembourg tax havens next in firing line 28 Feb 2008 After the scandal over little Liechtenstein, the two larger European countries will come under pressure to divulge more information about accounts. Both turn over information in cases of tax fraud, but not tax evasion. The distinction looks flimsy.
China’s rising costs begin to fan global inflation 28 Feb 2008 China's higher minimum wages, inflation and currency appreciation are pushing up global prices. For decades, cheap Chinese manufactured goods have been a major deflationary force. Now, Chinese cost inflation is reversing their effect.
Is Sotheby’s becoming an investment bank? 28 Feb 2008 It's beginning to look like one. The auction house underwrites artwork much as banks do LBO loans, and both pay huge bonuses to ensure that top talent sticks around. But Sotheby's shareholders should hope it avoids its banking brethren's bigger blunders.
Xstrata minorities sidelined in $87bn Vale merger 28 Feb 2008 The Brazilian miner has offered $87bn for its UK rival. But Swiss trader Glencore, Xstrata s biggest shareholder, has balked at the terms. It s a cautionary tale of what happens to other investors when a big shareholder pursues its own agenda.
What separates a rogue trader from a superstar? 28 Feb 2008 Maybe only timing. MF Global is the latest to admit to big losses. An employee s oversized bet on wheat will cost it $141m. It s no coincidence that volatile markets bring rogues out of the woodwork. In calmer, rising markets, they might have been lauded as superstars.
Billionaire Bloomberg opens his dance card 28 Feb 2008 The New York mayor has decided against running for president. But he s not done trying to influence the race, perhaps as a running mate for Obama or McCain. Both are senators lacking any financial or managerial expertise. Bloomberg has flaws, but would shore up these weaknesses.
Iberdrola should avoid a scorched earth defence 28 Feb 2008 The Spanish utility s complaints to the EU and the Spanish regulator offer a bitter taste at how it hopes to shield itself by raising a legal and political ruckus. Instead, Iberdrola should focus its fight against France s EDF on extracting maximum value for shareholders.
Eddie Lampert is no retail quarterback 28 Feb 2008 In his letter to Sears shareholders, the hedge fund maestro likens the retailer's experience to that of Super Bowl winners, the NY Giants, and their star thrower Eli Manning. But as a retailer, Lampert has a lot more to prove than Manning ever did.
Will Steve Ballmer throw a chair at Yahoo? 28 Feb 2008 The tempertantruming Microsoft boss has been uncharacteristically temperate while Yahoo dithers about its future. Yahoo s negotiating window may slam shut sooner than expected. Already its closest proxy, Google, has seen its shares slide by 15%. Time s a wasting.
RBS’s bullishness on ABN should be taken with a pinch of salt 28 Feb 2008 The UK bank forecasts an extra £450m synergies from its Dutch purchase. Sounds good? But at the same time, RBS has revealed that its previous megadeal, Charter One in the US, is struggling. Some scepticism over its ability to extract value from deals is warranted.
Sprint’s $30bn writedown could presage cash crunch 28 Feb 2008 The phone company s customer losses have entered warp speed. It thinks 1.2m will flee in the first quarter or more than all of last year. More worryingly Sprint s drawdown of $2.5bn of revolving debt suggests fear that a liquidity crisis could arise.
Are the Miami Dolphins the next Patriots? 27 Feb 2008 Paying a fat price for a losing football team would seem the height of folly. But property tycoon Stephen Ross's bid for the Miami Dolphins doesn't have to be a loser. Sportsteam investments are notoriously risky and hard to value, but bold contrarian bets can pay off.
BAA finally starts to grapple with mess 27 Feb 2008 Jettisoning the retailer who was running the Heathrow airport owner and replacing him with a nutsandbolts guy looks like a good first step. But Ferrovial, which bought BAA in a highlygeared transaction, still needs to stabilise its financing.
For-profit education bubble pops 27 Feb 2008 Few companies have grown as consistently fast as US forprofit colleges. Was it a mirage founded on a student debt bubble?
Gold sale wouldn’t give IMF meaning in life 27 Feb 2008 The international lender has lost its reason for existence. If it sold some of its gold reserves, it could earn enough income to keep up its lifestyle. But why bother? If the IMF s government shareholders don t want to support the institution, then it should be wound down.
Ferrovial´s BAA gets modest shot in the arm 27 Feb 2008 The heavily indebted airports group will be allowed to raise airline charges by a biggerthanexpected 23.5% to pay for increased capex. It s nowhere near what BAA was hoping to get. But this gives it a bit more wiggle room to undertake its mammoth £9.5bn refinancing.
Will Bernanke fall off the tightrope? 27 Feb 2008 The Fed chairman s insistence that inflation is under control is increasingly at odds with reality. If reported inflation continues to rise, and leads to a buyer s strike in the longdated Treasury market, Bernanke would share the fate of G. William Miller.
China’s oil companies should stay at home 27 Feb 2008 In the race for resources, statecontrolled Chinese energy companies have made little headway in topping Western oil majors. While they have some cost advantages, this doesn t seem to be helping them nail the big contracts. There are better opportunities right under their feet.