Brazil may be approaching a virtuous circle 30 Apr 2008 Brazil's debt upgrade to investment grade may reduce its high real interest rates. Since it is mostly open to foreign investors, that could produce a virtuous circle of faster growth. To get there, it must reduce corruption and survive the next commodities downturn.
Citi’s $11bn dividend won’t be back in a hurry 30 Apr 2008 The US bank s shareholders have been losing a game of financial strip poker. Citi has removed layers of the cash flow that used to cover them, as well as slashing its dividend. Even if profits recover, payments on new capital will prevent the old payout coming back.
Citi takes another dose of dilution 30 Apr 2008 Sure, selling $4.5bn of new shares hardly seems a big deal with RBS going for more than five times that. But at around $25 a share, against $50plus a year ago, it underlines Citi's sorry state and a new imperative for banks to show they have at least as much capital as rivals.
Zell’s Newsday tax scheme could be a warm-up 30 Apr 2008 He may have found a way to sell the newspaper taxfree. It s not the first time he s sidestepped Uncle Sam Tribune itself doesn t pay taxes. It isn't clear if his Newsday approach will fly. But if it does, he could use it to offload other assets.
Eurozone will suffer from ECB’s inflation failure 30 Apr 2008 Most of the eurozone may have avoided USstyle housing troubles, but excess money has brought excessive inflation. That has hurt consumer confidence and retail sales. The likely price of the central bank s weak control of money growth is a sustained slowdown.
Fed neglects key lessons from history 30 Apr 2008 In suggesting inflation will moderate, the US central bank is assuming weak growth will reduce upward pressure on prices. However this relationship could be overwhelmed by rapid money growth and soaring commodity prices. Before long, the Fed may be scrambling to raise rates.
BG puzzles with $12bn bid for Australia’s Origin 30 Apr 2008 The UK oil and gas exploration group is paying a 40% premium to Origin s share price to bolster its presence in the fastgrowing Asian LNG market. Origin s gas reserves are attractive. But BG would also get more than 3m Australian retail customers, which looks less attractive.
Citigroup still haunted by black hole 30 Apr 2008 The bank s role in Parmalat s collapse goes to trial on Monday. Proving Citi abetted fraud through securitisation may leave New Jersey jurors befuddled. But Citi s naming of a vehicle that allegedly disguised debt buconero black hole is easy to grasp.
New spotlight may threaten muni bond prices 29 Apr 2008 A new index on municipal debt default swaps might add some transparency to the $2.6 trillion market, but it could also pressure prices. If shortsellers push down the index, those who use it to value their muni bond holdings will suffer.
Grand Theft Auto pays off for Take-Two shareholders 29 Apr 2008 The company held its hostile suitor at arm s length until the game s debut, hoping for a blowout. That now looks smart. Big anticipated revenues from the virtual testosteronefuelled rampage should give it an edge in negotiations.
HBOS takes the pain with £4bn rights issue 29 Apr 2008 The UK mortgage bank has fully written down only £1bn of its mortgage assets. This accounting will give it a healthy 6.6% equity tier one ratio. HBOS thinks the market is too gloomy about US mortgage losses. But it s raising enough equity to provide some margin for error.
Deutsche Bank write-downs miss the marks 29 Apr 2008 Its first quarterly loss in five years should have been worse. The German giant didn t pare leveraged loan and commercial real estate values as much as peers. Gains from selling industrial stakes flattered the figures. Deutsche s sheen from sidestepping subprime is wearing thin.
Fannie Mae may need (yet) more capital 29 Apr 2008 The US mortgage giant said it had enough capital as long as the market didn t deteriorate sharply. But that may be happening. The home price slide is accelerating. Worse, the percentage of vacant homes hit a 50 year high last quarter.
Mortgage originators should bear risk of default 29 Apr 2008 Standard and Poor's new recovery estimates imply a 40% payout on subprime mortgages. An origination system that produced a huge price bubble and such extreme default rates is broken. It won't be fixed until originators retain some responsibility for credit risk.
Putin’s job offer to Prodi was just too crude 29 Apr 2008 Gazprom s offer to the outgoing Italian premier to chair the South Stream pipeline project was another attempt to drive a wedge between EU members. At least it shows that Russia is still taking the rival Nabucco pipeline project seriously. If only Europe did, too…
Nordic telecom champion would create little value 29 Apr 2008 A mooted deal between Norway s Telenor and SwedishFinnish rival TeliaSonera might boost regional prestige, but the synergies aren t compelling. Government interference blocked a previous merger attempt. Intrusive authorities could trip this one up too.
Steel futures will face real test in tougher times 29 Apr 2008 The London Metal Exchange fully launched two new steel futures contracts on Tuesday into soaring world steel prices. The LME has staked a lot on succeeding in a fragmented market. But the contracts' fate may depend on how they cope with a falling market.
Rockefellers’ Exxon governance clean-up worth supporting 29 Apr 2008 It s ironic the descendants of the man who created Standard Oil are lobbying Exxon to go green. That s exactly the kind of issue a nonexecutive chairman, separate from the CEO, would be in a position to evaluate. Of the four Rockefeller resolutions, this is the one to support.
Calpers departures highlight SWF-like conflicts 29 Apr 2008 The pension fund s CIO is leaving to pursue green investing. The CEO is leaving as well. The political noise surrounding the departures underlines that it's not just foreign staterun funds that have agendas beyond financial returns.
UK rebalances by tipping towards recession 29 Apr 2008 Mervyn King says the UK economy needs to rebalance. The Bank of England s governor is right, but the process looks painful. The financial engine is crunched and the consumer is holing up, while manufacturing isn t much of a motor. Recession and a slow recovery threaten.
Cadbury shouldn’t binge on Hershey 29 Apr 2008 The UK confectioner may have lost its crown after Mars bought Wrigley for $23bn. But a metoo deal with struggling Hershey is the wrong response. Cadbury should fix its woeful margins and then eye more enticing targets.
Can GLG weather the post-Coffey turmoil? 28 Apr 2008 Recovery from the current wave of resignations, redemptions and poor performance won t be easy. But the USlisted hedge fund group has been here before with Philippe Jabre arguably a bigger star than Coffey. And GLG s listed equity and strong distribution should help.
Continental’s decision to fly solo could pay off 28 Apr 2008 The US carrier has opted out of the airline mating scene, for now. That could make sense. With a relatively young fleet and a respected management team, it s better placed than legacy rivals to hold out and reap the benefits as others do the dirty work of merging.
Subsidies and quotas make food problems worse, not better 28 Apr 2008 France s farm minister wants programmes like the EU s agricultural policy in Asia and Latin America. That won t help the world food shortage. Subsidies and so on depress food production in poor countries and cause waste. Freer trade and global buffer stocks are better answers.
Kerkorian should be Ford’s quiet back-seat driver 28 Apr 2008 After his brushes with Chrysler and GM, the nonagenarian billionaire has taken a 5% stake in the storied automaker. The Ford family s voting block should lead to a muted approach as long as its turnaround stays on track.
Wrigley timing is sweet – but Buffett needs more deals 28 Apr 2008 Two years ago, he announced a $4bn acquisition on the eve of Berkshire Hathaway s famous annual meeting. Saturday s crowd of mostly adoring shareholders will love his latest $6.5bn deal to help Mars buy Wrigley. But Buffett needs more deals at least that big.
Loan market edges from frying pan into fire 28 Apr 2008 April has been the best month for loans since the credit crunch started. Banks sold tens of billions of dollars worth as demand from distressed buyers pushed prices up. But rising defaults could pummel the market in the coming months, keeping it closed to desperate borrowers.
Mars-Wrigley deal looks a lot like an LBO 28 Apr 2008 It s been nearly a year since megabuyouts dried up. But the $23bn confectionery deal resembles an LBO. Mars and Warren Buffett are finding $13bn of equity. Goldman Sachs and Buffett are providing $10bn of debt. There might be a lesson in the deal for buyout firms.
Wrigley loses its taste for public markets 28 Apr 2008 Mars and Warren Buffett are paying a chewy 28% premium for the US gummaker. That s a big gain for shareholders but perhaps not a knockout. But the Wrigley family may be motivated by things other than cash including the fuzzy embrace of a very private new owner.
Colonial lenders face uphill struggle to recoup losses 28 Apr 2008 Spanish banks are counting the cost of financing leveraged stakebuilding in the stricken property firm. After a debtfor equity swap, they need to almost double Colonial's share price to break even. That's not impossible, but the property market outlook isn't that rosy.