U.S. growth suggests a Bourbon economy 30 Apr 2010 Moderate Q1 GDP improvement looks less attractive when more closely examined. Half the growth was inventories, while the inadequate saving and payments deficits of 200307 are reappearing. Like the French royal family, the U.S. economy has learned nothing and forgotten nothing.
EU should stand up to airlines on state aid 30 Apr 2010 The case for giving handouts to airlines after this month's volcanic disruption is weak. Shareholders, future passengers and insurers not taxpayers should accept the risks associated with air travel. But the EU could also revisit the rules for dealing with acts of God.
Wall Street’s separation anxiety is misplaced 30 Apr 2010 Big banks don't want to spin off their lucrative derivatives desks, even into subsidiaries. Yet the U.S. Senate plan has merits. It would rid the derivatives market of perceived taxpayer support and discourage risky speculation. But international cooperation is critical.
Pritzkers cash out in unusually amicable fashion 30 Apr 2010 The sale of a majority stake in credit reporting firm TransUnion is the latest by the Chicago clan to unwind the $15 bln empire. Earlier squabbles over the spoils looked ominous for the plan. But it seems to have gone relatively well, given the trouble many rich families face.
Greece gets ready for great austerity experiment 30 Apr 2010 A tough new aidforpain deal is expected by Monday. Both the Greek and EU governments have finally grasped the scale of the challenge. But the plan will face domestic resistance, and wage cuts will only make the debt burden heavier. The crisis has been calmed, but not resolved.
Barclays drops back into the pack 30 Apr 2010 The UK bank did worse in fixed income in Q1 than in the same period in 2009, underperforming peers and overshadowing better news on bad debts. This rare disappointment from the Barclays Capital investment bank has upset investors. The competition isn't so weak this year.
Apple wields iPhone for greater tech power 30 Apr 2010 Boss Steve Jobs has ticked off the reasons why he won't allow Adobe's Flash software on iPhones and iPads. Some sound reasonable. But his real goal may be to force small apps developers to choose sides in the mobile device wars. Despite Apple's momentum, it's a risky ploy.
Shanghai’s big party may leave debt hangover 30 Apr 2010 The $4.2 billion spent on the World Expo, opening today, is double that of 2008's Olympics. Ten times that went on new infrastructure. Yet none of this will really help Shanghai become a financial hub. Large amounts of public funding may worsen the postparty comedown.
Breaking up banks is no silver bullet 30 Apr 2010 Politicians on both sides of the Atlantic including two of the party leaders fighting the UK election want to separate socalled casino investment banks from utility lenders. But simple rules would create arbitrage opportunities and rigidities without curbing risktaking.
Goldman finds itself out of court favor 30 Apr 2010 Like Sir Walter Raleigh under King James, the successful but already slightly suspect firm has suffered a grievous change of fortune. The Obama administration owes much to the bank, but politicians, like kings, are fickle. Raleigh got the chop. Goldman faces its own hard times.
ECB faces reputational haircut on Greek collateral 29 Apr 2010 Under recently softened rules, a few more downgrades would disqualify Greek government debt as collateral at the central bank. The ECB could move the goalposts again to keep a Greek default away. But any manoeuvre will bring financial risk and erode its political independence.
Lifting of refining curse allows Big Oil to shine 29 Apr 2010 It s not just a doubling of crude prices this year that is giving a healthy glow to U.S. producers like Exxon and Conoco. The refining sector, which recently splattered their accounts in red ink, is looking less bloody. Exploration and production profits can take center stage.
Worsening BP Gulf spill spells trouble for rivals 29 Apr 2010 Investors haven't knocked down the shares of other oil majors. Given the growing significance of deep sea drilling, this seems too sanguine. As the slick grows, plans for offshore drilling in the U.S. face questions and similar operations worldwide will come under scrutiny.
China’s megabanks prepare for a credit winter 29 Apr 2010 While profits from lending were sluggish, ICBC and Bank of China enjoyed a spike in fees. That may not last, so they deserve credit for squirreling more away against bad loans. But if bad debts really balloon, even extra padding won't stop earnings from being wiped out.
Brazil needs to run a budget surplus 29 Apr 2010 The central bank raised interest rates to fight inflation even though real rates are already high. The currency is overvalued and getting more so as the government runs a budget deficit even during a boom. A Chilean fiscal policy and rainyday fund would be advisable.
Unilever scrubs up rather well 29 Apr 2010 After years of pedestrian performance, the UK consumer goods group has pulled off the trick of raising volumes and margins simultaneously. Just 16 months in the job, Unilever's new CEO is showing that selling soap in emerging markets can allow both buyer and seller to clean up.
Investors are being too harsh on big Spanish banks 29 Apr 2010 Concerns about Spain are weighing on shares of Santander and BBVA. But the banks are doing better than most domestic rivals, and operations abroad should help support earnings. Though a Spanish crisis would be severe, investors are fretting too much about this unlikely scenario.
A little U.S. airline concentration not so bad 29 Apr 2010 The idea of Continental and United merging may make consumer advocates worry about higher ticket prices. But the current situation where nearly all the benefits accrue to flyers rather than airline shareholders is not a good longterm recipe for capitalism.
E.ON’s $7 bln U.S. sale comes with tolerable pain 29 Apr 2010 The German power giant is flagging a 900 mln euro writedown on the sale of its Kentucky operations to U.S. rival PPL. E.ON seems to have misjudged the strategic opportunity in the U.S. utility sector. But after overpaying on the way in, at least it has got a fair price on exit.
Mega LBOs shift into reverse 29 Apr 2010 Private equity firms are mulling IPOs of their big peakofthemarket buyouts, including Nielsen and HCA. But first up is NXP. With chip demand recovering, it's a good time to deleverage. Though hardly a big win for owners, the float will at least help start to unclog portfolios.
Greek bank investors are counting on a bailout 29 Apr 2010 Shares in the country's largest lenders have rallied in recent days, but are still down 20 percent this month. Access to funding remains precarious, and the banks would face big losses on sovereign debt if Greece defaulted. Investors are placing a big bet on an EU rescue.
Derivatives on deck for Buffett faithful 29 Apr 2010 The Sage of Omaha claims to love simple things like ice cream. But the thousands at Berkshire Hathaway's annual powwow may hear a lot about complex derivatives. Buffett has $63 bln of his own exposure to discuss and he may have views on regulatory proposals in Congress, too.
UBS reboot begins far from home 29 Apr 2010 The Swiss bank is going full circle in Brazil by acquiring a broker there just a year after it sold investment bank Pactual. True, this first deal for CEO Oswald Gruebel is tiny, and his turnaround has a ways to go. But returning to a key growth market is a symbolic step forward.
Whatever the name, sovereign defaults bring pain 29 Apr 2010 As market talk turns to Greek nonpayment, the euphemisms are coming out. But without support from the EU and IMF, Athens would be unlikely to get by with mere restructuring. Creditors would end up suffering, perhaps deservedly. But the pain of default varies widely.
Why do markets pay attention to rating agencies? 28 Apr 2010 Following their appalling record predicting the subprime mortgage crisis, it is astonishing and a bit sad that investors still quake when S&P junks Greece and downgrades Spain and Portugal. Chalk it up to the embedding and megaphone effects.
Euro could survive a Greek default 28 Apr 2010 Even if Athens gets a lifeline, some debts may eventually need to be written down. That could start a cascade of woe which ends with a technically bankrupt ECB and a broken euro. But the single currency need not be in danger. A well managed default could even make it stronger.
Nomura’s good quarter may not be good enough 28 Apr 2010 All the Japanese brokerage's businesses turned a profit for the first time in two years. But it missed the fun its rivals had in the United States, and wound up even more dependent on Japan. Nomura still needs to do more to become a member of investment banking's inner circle.
Spain still has time to stave off debt crisis 28 Apr 2010 Contagion is no longer a threat, it's a reality, with S&P's downgrade. Spain has challenges, but its debt load looks sustainable. The catch is the government must make tougher decisions than it has managed so far. If Zapatero doesn't shape up soon, there could be real trouble.
Fed maintains course – into possible storm 28 Apr 2010 The FOMC has kept its extended period language for ultralow interest rates, shrugging off soaring commodity prices. But broad money supply has declined of late, as it did in summer 2008. If nothing gives, Fed policy could steer right into a new liquidity problem.
Politics, not substance, delaying U.S. reforms 28 Apr 2010 If the bill to rejig financial regulation implodes in the Senate, it won t be because of policy divisions. The Republicans have finally offered their proposals. But it all looks much like what the Democrats are pushing. If both sides want a deal, it's there to be had.