Fed’s mortgage sales tighten Volckerian knots 29 Feb 2012 The central bank offloaded the last $6 bln of housing dreck from the AIG rescue. The deals can be construed as prop trading, but also show how big banks work well as market-makers. Maiden Lane exemplifies the conundrum confronting regulators as they draft the final Volcker Rule.
Yelp IPO: four reviews, 2 stars out of 5 29 Feb 2012 Categories - user review websites, stock sales, unprofitable enterprises, Google rivals. Location - Silicon Valley and New York Stock Exchange; Attire - casual; Price range - $ to $$ per share; Good for bankers and backers - yes; Good for investors - no.
Markets should get used to Washington dysfunction 29 Feb 2012 The U.S. capital endured snowmageddon last winter, but Snowemaggedon could prove worse. Olympia Snowe’s retirement messes up the math for a GOP Capitol coup. Though the private sector often thrives on gridlock, the prospect of recent behavior continuing may change the sentiment.
EU banks avoid overdose on ECB wonder-drug 29 Feb 2012 Demand for the central bank’s second fix of cheap three-year loans was a chunky 530 bln euros. But the beneficiaries include smaller banks keeping themselves afloat, not just big lenders recklessly bingeing. While the high take up carries risks, it is the lesser of two evils.
JPMorgan offers peek into trading magic circle 29 Feb 2012 Investment bank boss Jes Staley has broken Wall Street’s code by revealing new data on how much the firm rakes in as a market-maker. It won’t quell suspicions that some of it is really prop trading. But it sheds useful light - and may whet investors’ appetite for even more info.
Murdochs should go further out of print 29 Feb 2012 James, the News Corp scion, is shedding responsibilities for the scandal-ridden UK newspaper business. He will focus on TV, in accord with his personal interests. He’d do outside shareholders a big favour if he could persuade his father to sell the titles.
Dutch cable IPO shouldn’t want for subscribers 29 Feb 2012 Ziggo dominates Dutch cable TV and generates lots of cash. That’s why the company, worth maybe 7.5 bln euros with debt, is a clear IPO candidate. The record of peer Kabel Deutschland helps too. But a decent discount may be required to re-open Europe’s fragile new-issues market.
Shell can afford to let Cove Energy go 29 Feb 2012 Gas-hungry Asian rivals are complicating the oil major’s attempt to buy 8.5 percent of a giant African gas field. Shell can probably justify paying more, but has no need to get into a bidding war. Even if Cove gets away, there should be other opportunities to participate in the field.
Ethical economy: Take the sacred out of finance 29 Feb 2012 Finance is useful and can be virtuous. It can do “God’s work”, as Goldman Sachs’ boss once said. But the industry has acquired an undeserved aura of divinity which has masked widespread incompetence, especially by central bankers. It’s time for a change.
Putin 2.0 could be reformist – if reason prevails 29 Feb 2012 The Russian economy’s need for foreign capital should leave Vladimir Putin with no other option than reform, once he is elected to a third presidential term on March 4. He should – finally – get serious about the rule of law. He may do so. That’s the reasonable scenario.
StanChart doesn’t justify premium over HSBC 29 Feb 2012 Both emerging market lenders had a strong 2011, in different ways. StanChart is growing while HSBC restructures. But StanChart is relatively bigger in troubled India and Korea, while hiring has become expensive. Takeover hopes aside, the valuation gap is hard to justify.
French left courts disaster with 75 pct tax plan 29 Feb 2012 The proposal of socialist presidential contender François Hollande to tax income above one million euros a year at 75 pct is bound to backfire. Either he’s serious – and French business will suffer. Or he’s not – and he’s on the way to a massive loss of credibility.
Stock markets don’t need the data overload 29 Feb 2012 British economist-philosopher John Kay is reviewing the disconnect between investors, often short-term and herd-like, and companies, which should be managed for both now and near-eternity. He wants less pseudo-information. That would be a small move in the right direction.
India’s auction tack bodes well for privatisation 29 Feb 2012 Questions remain about retail participation and whether New Delhi is genuinely convinced by the merits of privatisation. But the sale of shares in the state-controlled oil and gas company by auction is a new departure in India that promises to be effective and efficient.
$500 bln valuation may still be only half an Apple 28 Feb 2012 The market cap of the world’s largest company is edging toward that landmark threshold. But it could just be a pit stop on the way to $1 trln. A quick tour of Apple’s other eye-watering numbers explains why.
Painful savings rebalancing ahead for U.S. economy 28 Feb 2012 Up to now, Americans have “dissaved” without much suffering. Until 2008, asset prices rose as the personal savings rate declined. Since then, personal savings have risen - but the government has borrowed more. A painful “anti-Keynesian” rebalancing is in the U.S. future.
GM needs better ideas for Opel than Peugeot deal 28 Feb 2012 Europe suffers from overcapacity in cars. It’s not at all clear how spending $325 mln for a minority stake in its struggling French rival changes that dynamic, particularly given GM’s history. The deal only makes sense as a precursor to gut-wrenching consolidation.
Markets might yawn at second ECB cheap-money fix 28 Feb 2012 The ECB’s first three-year liquidity facility in December sparked a rally across markets. The second may not have the same impact. Those hoping for a massive injection of cheap money may be disappointed. And expectations of further ECB long-dated funds look premature, at least for now.
Vedanta restructuring may need a rejig 28 Feb 2012 The India-focused FTSE 100 mining group is simplifying itself. There are sound commercial gains to be made in the process, but doubts linger about whether the assets are being transferred at equitable values. To get the deal done, Indian investors may need a bit more of the pie.
Globalization stops short at the corporate suite 28 Feb 2012 The global war for talent is a popular justification for exorbitant CEO pay. But with few exceptions, expat chiefs are still a tiny minority. It’s bad news for shareholders in high-pay hubs like the United States and Britain who could find better-value stewards overseas.
No winners from Barclays tax crackdown 28 Feb 2012 The UK government has closed two loopholes used by the lender to avoid tax. That’s a setback for CEO Bob Diamond’s efforts to present the bank as a good corporate citizen. But by introducing retrospective legislation, ministers have made the UK tax system even more unpredictable.
"Buy China" auto drive not just protectionism 28 Feb 2012 Excluding foreign brands from new government orders looks unfair. But domestic overproduction, and the image of privileged Audi-driving officials, have created a political dilemma. When growth slows, concerns at home can seem more important than keeping trade partners happy.
Spain’s regions still threaten fiscal turnaround 28 Feb 2012 The central government largely met its deficit targets last year, but the country’s regions accounted for two-thirds of an overall miss, with total deficit at 8.5 pct of GDP against a 6 pct target. The market seems sanguine. This could change if Madrid can’t discipline the provinces.
Investors ill-served by crude accounting standards 27 Feb 2012 Oil, that is. Divining how much explorers have discovered matters greatly to shareholders. Yet they must choose between two equally unreliable figures. Estimates based on SEC rules gyrate wildly with energy prices, while company data are too opaque. Shareholders deserve better.
New York Times adds grist to Jamie Dimon’s mill 27 Feb 2012 JPMorgan’s boss loves citing media pay to deflect criticism of banker comp. It’s not a great comparison. But paying the NY Times’s ex-CEO $4.5 mln for part-time work, 560 times more than the average Gray Lady reporter, looks egregious enough to raise eyebrows even on Wall Street.
Browne’s North Sea idea is more than nostalgic 27 Feb 2012 Buying into Fairfield Energy would befit the ex-BP boss, who managed a North Sea oil field in the 1980s. Yet there is sound commercial logic too. Oil prices, and opportunities to scoop up oil majors’ unwanted acreage, have increased since Fairfield pulled its IPO in 2010.
Yahoo activist hasn’t yet earned four board seats 27 Feb 2012 Dan Loeb’s Third Point hedge fund correctly diagnosed the board as the problem. But investors should demand he provide a sound prescription to cure ailing Yahoo before voting for his full slate of directors. Until then, Loeb merits just one spot - to keep the pressure on.
Apollo’s $7 bln bet won’t get gas from leverage 27 Feb 2012 The buyout firm and its partners are writing a chunky 40 pct equity check for El Paso’s E&P business. With energy prices volatile, lenders are rightly cautious. But without the usual debt juice, the best hope of a punchy investment return is a big upturn in gas prices.
Hugo Dixon: How to pep up European growth 27 Feb 2012 In the short run, the priority is to avoid an austerity spiral. In the long run, structural reform and a drive to create a dynamic single market are the answers. Leaders, meeting at the latest summit this week, should link the two.
Buffett’s "trust me" succession plan doesn’t fly 27 Feb 2012 The Oracle says he has at last identified someone to replace him as boss of Berkshire Hathaway when he’s gone – but isn’t saying who. Given that one prime candidate left amid controversy and the company has underperformed of late, Buffett should name the person he has in mind.