IBM turnaround requires atypical activist fix 31 Dec 2014 Big Blue’s strategy of cost cuts and debt-fueled buybacks is no longer working – but the tech giant keeps trying. A tarnished balance sheet, lean staffing and a history of disposals rule out typical activist wheezes. Prodding the company to invest in its business could pay off.
Vienna offers a model for stable foreign policy 31 Dec 2014 The 1815 Congress of Vienna ended the Napoleonic Wars, and its participants worked together over the next decade to prevent destabilizing regime change. This principle could have reversed many bad intervention decisions over the last 40 years. Its lessons are worth studying.
Goldman/Espirito Santo mess raises valid question 31 Dec 2014 The U.S. bank may take a hit after a loan to failed lender Espirito Santo was moved by Portugal’s regulator into BES’ bad bank. Goldman has fallen foul of Portuguese law, and its own complex business. The fiasco highlights the need for greater clarity over bank resolution.
Lithuania keeps euro’s little flame alive 31 Dec 2014 The monetary union will welcome its 19th member on Jan. 1. Never mind widespread euro gloom and a looming new Greek crisis, the Lithuanian people heartily support adhesion – for political as well as economic reasons. Other euro zone members can raise a feeble cheer.
Banks will make asset managers pay for regulation 31 Dec 2014 Persistently low returns are spurring investment banks to re-price products like repo financing and prime broking. In 2015, expect firms to get serious about passing on the pain of capital and liquidity rules. Higher costs could in turn force some money managers to consolidate.
What we wrote – and you read – in 2014 31 Dec 2014 Some of the most-read views covered the Harvard endowment, the pope’s economics and China’s hunger for property. Corporate topics included Morgan Stanley, Espirito Santo, Alibaba and Facebook. First prize, though, went to a piece on how Breakingviews picked a World Cup winner.
China rail merger reveals topsy-turvy reform logic 31 Dec 2014 The People’s Republic is re-creating its domestic train-building monopoly to boost competitiveness abroad. State-backed CSR will buy almost identical CNR for $14.4 bln. Synergies may take time to realise but the new giant should be able to turn up the heat on foreign rivals.
Wearable tech will go from novelty to necessity 31 Dec 2014 Activity trackers like Jawbone and Fitbit gather vast quantities of deeply personal data. Consumers aren’t always keen to overshare. But healthcare and insurance companies are finding ways to make it worth their while. Geeky gadgets could soon become too useful to ignore.
Shake Shack IPO disappoints in taste test 30 Dec 2014 Celebrity restaurateur Danny Meyer’s global chain of burger joints is serving up some of the uncommon fixings found in new tech stocks. Two classes of shares and creative financial metrics are unappetizing. At least the bottom line offers a sweet refreshment to wash it all down.
Accounting fraud is ripe for fresh scrutiny 30 Dec 2014 Dodgy numbers will replace insider trading as U.S. watchdogs’ preferred prey in 2015. New auditing and analytics arms give the SEC a head start, even if SarbOx reforms make cases harder to track down. With the likes of SAC chastened, it makes sense to refocus on the next Enron.
Tesco will have to fight for its independence 30 Dec 2014 At $40 bln, the UK’s No. 1 grocer would be an M&A mouthful. A leveraged buyout looks tricky but strategic buyers have a rare opportunity. Tesco’s long-suffering current shareholders might jump at a chance to cash out. Much depends on the person chosen as the new chair.
UK faces risk of cold-weather blackouts 30 Dec 2014 Britain’s electricity system is ageing and the mix of generating technology is changing. Both factors increase the danger of power cuts at peak times. Contingency plans include paying companies to accept temporary grid outages. New capacity can’t come soon enough.
Where to hide in an emerging market rout 30 Dec 2014 Developing nations tend to get into trouble after seven fat years. By that yardstick, a meltdown is due. If rising U.S. interest rates help trigger a crisis, investors will look for relatively safe economies. Hungary, Mexico and the Philippines are the most attractive shelters.
Greek limbo will weaken Europe’s recovery 29 Dec 2014 The failure of Greece’s deputies to agree on the country’s president will lead to new elections. That may bring left-wing Syriza to power, putting Athens at odds with its creditors. Reforms will stall, while uncertainty could undermine the ECB’s plan to boost growth in the euro zone.
Bad ideas catching up with Latin America in 2015 29 Dec 2014 For four years, the region has mostly lagged world economic growth. The IMF predicts another year of the same. While Pacific-oriented countries will shine, Brazil, Argentina and Venezuela will suffer. With a couple of exceptions, misguided policies are coming home to roost.
Ukraine crisis forced into suspended animation 29 Dec 2014 Markets worried about Europe’s economy in 2014. They will worry about Europe’s security in 2015. EU sanctions over Ukraine will weigh heavily on Russia’s economy. A lot depends on Vladimir Putin, but Europeans need to define what they want sanctions to achieve.
M&A spin doctors could get swept up in the action 29 Dec 2014 Financial PR specialists have been buoyed by the boom in mergers and activist investing. History suggests independent outfits like Joele Frank or Brunswick may be tempted to find an investor or bigger owner. They should at least have enough deal nous to know when to sell.
Alibaba in 2016: an imagined letter to investors 29 Dec 2014 The e-commerce group’s first year as a listed company brought growth and change, departing chairman Jack Ma writes in a hypothetical memo. Profitability is falling, regulators circling, and new projects have uncertain returns. Even a thoroughbred is tested on a long journey.
U.S. housing demand is building 26 Dec 2014 The post-crisis rebound boosted home prices 25 pct even as sales and construction lagged. Increasing household formation, job creation and easing credit look set to give the market another leg up, despite rising interest rates and the headwind of sliding affordability.
Bitcoin’s defects will hasten its demise in 2015 26 Dec 2014 The leading crypto-currency’s economies of scale in mining and its transaction system’s vulnerability to subversion by a dominant miner make it unsound. As seignorage declines it will become cost-uncompetitive for transactions. Flaws may cause its price to lose further altitude.
Review: Fixing the CIA – a novel approach 26 Dec 2014 Could an outsider best reform the CIA in the wake of torture revelations? In David Ignatius’ novel “The Director,” a pro-privacy tech CEO tries to drag an agency that has lost its way into a new world of tighter rules, leaky secrets and cyberthreats. Good idea, uneven results.
JPMorgan soul-baring cuts room for error 24 Dec 2014 Jamie Dimon’s bank has followed Goldman Sachs’ 2011 lead by publishing a report detailing how it has responded to crises. Amid the PR-speak are some worrying admissions and much-needed improvements. Future failures and shareholder concerns will be harder to explain away.
Clean sweep needed to restore trust in Petrobras 24 Dec 2014 The state-controlled oil giant is mired in a corruption scandal and has seen its stock plunge over the past year. Nothing short of firing current management and appointing more independent directors will allow Petrobras, and really Brazil, to restore credibility with global markets.
Mary Barra gets a second first year at GM’s wheel 24 Dec 2014 The carmaker’s ignition-switch fiasco crashed her debut as CEO. The crisis may, though, have speeded up much-needed changes. Barra needs to show these will stick. She also has to prove the Motown firm is prepared for what may be some of the biggest changes the industry has faced.
Uncle Sam stoked to hash out marijuana in 2015 24 Dec 2014 Now that four U.S. states and D.C. have legalized recreational cannabis, commerce and safety warrant better regulation. But federal rules prohibiting the drug create obstacles. For the fledgling industry to mellow, Washington needs to tweak laws to consent to states’ will.
Inflation could make a surprise comeback 24 Dec 2014 Price and wage increases look like endangered economic species. Falling commodity prices make it hard to imagine a comeback. But many policymakers would welcome a return of mild inflation. They might eventually get more than they want.
Euro zone will flit between crisis and catharsis 24 Dec 2014 Elections in Greece or Spain could trigger fresh crises. Populist parties are on the rise, the economy is stalling and governments are paralyzed by their divisions. On the other hand, the euro zone has stronger banks and an activist ECB. There is cause for hope, but it is tiny.
Edward Hadas: The virtues of job fidelity 24 Dec 2014 Companies can have their own purposes, characters and cultures. They can have an identity which is independent of government, and sometimes even opposed. But employers cannot be strong actors in civil society unless the staff are loyal to them and they are loyal to their staff.
Cheaper oil no friend to Asia’s households 24 Dec 2014 Real wages are growing 2 percentage points below their long-term average, reflecting labour’s weak bargaining power amidst slowing growth. Falling oil prices and low inflation could prompt employers to be even more tight-fisted in 2015. Household finances might wobble.
Bank cyberinsurance is overdue to come of age 23 Dec 2014 It’s a confusing market, but growing fast. No wonder with a huge breach at JPMorgan in 2014, never mind monsters at Sony and Home Depot. Add a Washington campaign, and insurance may become standard. As well as financial cover, that could improve security – but only at the margin.