Latam can rely on masses for next phase of growth 31 Dec 2012 A few key people like the world’s richest man and showy political leaders have epitomized the region for years by spearheading the commodity-led, export economies. In 2013, a burgeoning middle class, helped by low interest rates, will make a mark powering Latin America’s future.
Calamity likely to be postponed again in 2013 31 Dec 2012 The financial crisis has been frustrating for doom-mongers. Sure, debts are still high and the financial system’s reconstruction is slow. But growth has been no worse than tepid and China refuses to collapse. Even if the U.S. goes over the fiscal cliff, the end is not yet nigh.
Hollande gets chance to forget 75 pct tax rate 31 Dec 2012 A French court has struck down the controversial 75 pct tax rate on incomes topping 1 million euros a year. The government could redraft the law, but the ruling provides a good opportunity to cease and desist. Sadly, politics could overrule what economics dictates.
UK’s chopping Chancellor may face the chop 31 Dec 2012 As the UK economy wobbles, George Osborne’s austerity policies are under fire. It’s unfair: the essential surgery will help revitalisation. But as 2013 progresses the Chancellor of the Exchequer may become more of an electoral liability. He could find himself axed.
Predictions are rubbish 31 Dec 2012 Forecasts for 2013 are abundant. That’s fine. But trouble comes if you chose to believe the soothsaying. Predictions are usually wild guesses or extrapolations of trends of the past. Even when they are accurate they are all-but impossible to interpret.
Draft obit for 2020: 2-and-20 fee structures 28 Dec 2012 The archetypal hedge fund fee deal survived the 2008 crunch and the euro zone meltdown, but not the industry’s growth. Asset gathering, tight controls and cautious bets by a new generation of fund bosses brought a decade of low returns. Fee gravity was irresistible in the end.
EU drops the ball on Monte dei Paschi bailout 28 Dec 2012 The 3.9 bln euro recapitalisation of Italy’s third largest bank had looked likely to punish Monte’s foolhardy equity investors. Instead, the European Commission has let them off the hook. That hurts Italian taxpayers and dilutes important single market principles.
Coal’s ascendancy to leave ailing U.S. miners in pit 28 Dec 2012 The black rock is set to replace oil as the world’s top energy source within five years. America sits on 28 pct of the planet’s coal. But geriatric mines and poor transport will prevent the U.S. industry profiting from the boom. Australian and Indonesian miners are better placed.
Review: China’s red capitalism needs retooling 28 Dec 2012 The limits of China’s authoritarian capitalism are increasingly evident, as former journalist James McGregor argues. Corruption is endemic and vested interests block much-needed reforms. To unlock new drivers of growth, the Communist Party needs to loosen its economic grip.
Mario Draghi’s three challenges 28 Dec 2012 2012 was the year of the Dragon. Mario Draghi’s promise to buy bonds prevented a calamitous loss of confidence and brought stability to the zone. Next year he will have to deliver on that promise, and more besides.
China’s hukou belongs on history’s scrapheap 28 Dec 2012 The 54-year policy that ties people to their home town has helped cities to get rich without attracting the growth of slums. Now it mainly benefits urbanites and holds back the rural poor. Forget the fear of being swamped - bigger cities are healthy for society and the economy.
Gazprom’s travails encapsulate Russia’s problems 28 Dec 2012 For decades, Gazprom’s grip on EU gas supplies made it a key lever of Russian might. But years of mismanagement have taken their toll. What’s more, gas isn’t what it used to be. The new torch-bearing company may be Rosneft. But Russia remains a badly-managed resource economy.
Prepare for a moody, grungy and defiant year 28 Dec 2012 The 21st century becomes a teenager in 2013. It will talk to you in barely decipherable grunts. It will say you don’t understand. It will laze around in bed. It will complain, and it will pester you endlessly about iPhones.
Bank CEO survivors’ club may shrink again in 2013 27 Dec 2012 Of the major bank chiefs who had their jobs before the crisis, three remain: Goldman’s Lloyd Blankfein, JPMorgan’s Jamie Dimon and Brady Dougan at Credit Suisse. Each has had setbacks. But the two U.S. bank heads appear to have shrugged them off. Dougan looks more vulnerable.
U.S. doesn’t need Washington for economic stimulus 27 Dec 2012 President Obama’s planned one-time jolt has been stymied. But a divisive corner of the energy industry has many hallmarks of a boost to the nation’s wallets. Shale oil and gas production pumped $140 bln into 2012’s economy. It won’t cure America’s ills, but it can ease the pain.
Penguin in bondage hides real risks in media M&A 27 Dec 2012 Three tie-ups from 2012 will alter media in 2013: Penguin-Random House, Universal-EMI and Disney-Lucasfilm. In books and music, the business case for consolidation is clear. Wags will giggle about “50 Shades of Penguin”, too. But the real cultural impact may be less benign.
Weibo should tap the financial network in 2013 27 Dec 2012 China’s rambunctious social media site is valued by investors at $700 million, based on owner Sina’s share price. Weibo has two hard-to-copy assets - its “social graph” and political usefulness. If it can monetise them, Weibo might be worth many times that.
Euro-practice awaits stronger theory 27 Dec 2012 Peter Kenen, who died on Dec. 18, helped develop the theory behind the single currency. The ideas - trade, transfers, shocks - remain pertinent, but Kenen’s successors will have to deal with unions which are more incremental, nuanced and political than the current theory allows.
US housing doesn’t need another government bailout 26 Dec 2012 The White House is mulling allowing homeowners with underwater private mortgages to refinance into cheaper government-backed loans. But Washington should be planning its exit from home finance, not extending its occupation. Luckily, these latest plans look like a pipe dream.
Mexico may teach U.S. a lesson on good government 26 Dec 2012 The country needs fiscal and energy sector reform. Its rival political parties have little history of working together, so that might sound hard. But they look set to reach a compromise with far less rancor than their counterparts north of the border.
Fading power of oil autocrats will aid growth 24 Dec 2012 Democracies are starting to outclass countries like Iran, Venezuela and Russia in energy production. That should reduce the economic and political influence of such authoritarian states. The West’s booming output should steady fuel prices, a rare boon for the global economy.
Monti tries to rise above political fray 24 Dec 2012 Italian outgoing premier Mario Monti has published a manifesto but isn’t backing any party in next year’s election. The move falls short of the engagement some had expected. But it may win broader backing for his reforms, and pressure the main parties to embrace his agenda.
Europe’s two challenges: economy, unity 24 Dec 2012 The euro crisis will become the European crisis as governments realise that among all the things they’ve done in the last two years, austerity is what has failed. And the split will widen inexorably between the 17-member zone and the rest of the EU.
A merger arb writes to Santa 24 Dec 2012 It’s been another thin and bumpy year for betting on M&A. So, having finished the investor letter, one desperate European merger arbitrageur decided to write to Santa with a 2013 wish list. Breakingviews obtained a copy from a source close to the North Pole.
Xmas overspending doesn’t breed higher returns 24 Dec 2012 If Christmas gifts were an investment, they would fall under the law of diminishing returns. Overspending is unproductive and small presents may be more efficient, behavioural economists suggest. A case where stinginess makes sense. At least economically.
GE’s $4 bln swoop on Italian supplier is shrewd 21 Dec 2012 The U.S. conglomerate will buy aerospace components maker Avio for $4.3 bln, or 8.5 times EBITDA. GE simplifies its supply chain, grows in the booming civil aviation market, and should reap savings. After a bumpy ride, Avio’s private-equity owners also reap a solid return.
Washington may finally take up mortgage reform 21 Dec 2012 Assuming Congress settles the deficit debate, housing finance should be its next stop. Lawmakers have postponed reforming the government’s role in funding home loans for four years. Some hurdles still remain. But economic, regulatory and political obstacles are dissolving.
Latam minority investors strike back against Enel 21 Dec 2012 The Italian utility tried to foist overvalued assets onto shareholders of Enersis, its Chilean unit, as part of an $8 bln capital hike. Minorities rebelled and with regulatory help forced Enel to restructure the deal. It’s a small but significant victory for Latam shareholders.
UK government loses wiggle room on bank reform 21 Dec 2012 An influential parliamentary commission has endorsed UK plans to erect firewalls between retail and investment banking. But it has also called for tough safeguards including the option of forcing bank breakups. That’s a welcome push-back on attempts to water down new legislation.
Modi’s Gujarat win doesn’t mean he will rule India 21 Dec 2012 The right-wing leader’s third electoral win in his home state has boosted his stature. But Narendra Modi’s chequered past and autocratic personality could prevent him from becoming prime minister. Investors betting on Modi to provide effective governance could be in for a shock.