High-speed traders just latest market rent-seekers 31 Mar 2014 In “Flash Boys” Michael Lewis claims they are rigging equity markets. Even the Goldman COO acknowledges concerns. New rules, taxes or structures could reduce unfair advantages. While someone has to make money making markets, profit shouldn’t be allowed to grow unchecked.
GM, regulator dabble in Wall Street shortcomings 31 Mar 2014 A combo of laziness, greed and incompetence characterized the response by the carmaker and its overseer to the ignition switch fault. In this sense, the Detroit saga echoes many of the corporate and regulatory failings that preceded - and contributed to - the financial crisis.
Mike Cavanagh takes a pushmi-pullyu pay cut 31 Mar 2014 Jamie Dimon’s protégé at JPMorgan is working for less at Carlyle, estimating his new incentive pay using recent results. On the one side, Cavanagh may have really wanted out of the banking grind. On the other, if he can help Carlyle grow a lot he could score a mega-payday.
Ukraine needs gas efficiency more than imports 31 Mar 2014 Congress is debating speeding up U.S. gas exports to curb Russia’s sway over its former satellite. A cheaper solution lies closer to home. Ukraine is the world’s second most wasteful energy user. Merely matching Romania’s efficiency would slash Ukraine’s gas bill by two-thirds.
ECB has to cope with global disinflation illness 31 Mar 2014 The malaise of meagre price increases and high sovereign debt is almost global, but the euro zone is suffering particularly badly. The ECB is constrained, too, because it has so many national masters. Still, a bold QE campaign might be able to keep deflation away.
UK authorities show worrying market ignorance 31 Mar 2014 Insurance stocks fluctuated wildly after the government and the regulator each broke price-sensitive news in a clumsy fashion. The failure to anticipate market mayhem betrays poor instincts. It argues for tighter rules around dissemination of news by those that supervise.
Official attention will make or break bitcoin 31 Mar 2014 Scrutiny from tax authorities and regulators may deter off-the-grid types who like the digital money for its anonymity. Yet interest from investors and even creators of derivatives could start drawing bitcoin into the mainstream. Either way, its days in the shadows are over.
Companies risk changing euro view at wrong time 31 Mar 2014 A rising single currency has confounded and hurt European exporters. An increasing number are becoming euro bulls, but their conversion could be ill-timed. While the currency’s rally may not be over, the ECB seems too unhappy with euro strength for it to last past autumn.
Monte Paschi swaps tail risk for bid speculation 31 Mar 2014 The foundation that was the Italian bank’s largest shareholder has sold yet more stock, this time to BTG Pactual and another Latin American investor. With all three supporting MPS’ upcoming rights issue, higher returns – or a bid – are replacing the threat of nationalisation.
Global house price surge calls for QE door to shut 31 Mar 2014 It’s too soon to call it a global bubble, but house prices are rising in most countries outside southern Europe. U.S. quantitative easing is a big factor, because capital inflows generated credit growth in emerging economies. Tighter monetary policy, now, is the simplest cure.
Hugo Dixon: Don’t bet on EU treaty change 31 Mar 2014 Wolfgang Schaeuble and George Osborne, the German and UK finance ministers, want European treaties redrafted to shore up the euro zone and keep Britain in the EU. But just because they want this, doesn’t mean it will happen – not least because treaty change isn’t needed.
Triple defence will shield Japan from tax burden 31 Mar 2014 The bump in the country’s sales tax on April 1 is threatening growth. But fiscal policy that pumps extra revenue back into the economy and a revival in investor optimism over deregulation can prevent a deflationary funk. If those tactics fail, there is always the Bank of Japan.
China developers could pull economy into a hole 31 Mar 2014 The recent default of a Ningbo group highlights the risks of a property bust. As sales slow, homebuilders are scrabbling for cash, pushing out completion dates and luring buyers with gold ingots. Real estate still holds the key to China’s growth. A bailout may be unavoidable.
Boards’ defender-in-chief keeps fighting last war 28 Mar 2014 Lawyer Marty Lipton proved again at the New Orleans M&A confab that he can give as good as he gets. But prior panelists’ emphasis on improving governance and shareholder value made his swipes at activists seem dated. The legal lion is sounding more stubborn than persuasive.
U.S. LNG exports set for boost from Ukraine 28 Mar 2014 Though liquefying America’s plentiful gas for export makes business and economic sense, approvals are enmeshed in politics. U.S. gas wouldn’t reach Europe for years, but the energy implications of Kiev’s standoff with Moscow provide cover for lawmakers to give projects the nod.
UK insurance investors learn to assume the worst 28 Mar 2014 Shares in Britain’s big insurers have fallen sharply on news of a probe into possible mistreatment of some customers. As with recently announced pension reforms, incomplete information has added to the fear. Still, it is possible to rationalise the 4 bln stg hit to market values.
Data realism conveniently saves Argentina $3.5 bln 28 Mar 2014 Last year’s growth was 3 pct officially, against expectations of a suspiciously high 5 pct. That allowed Argentina to avoid a payout on GDP-linked bonds. But the move toward more a credible economic policy has broader, lasting benefits too, like helping YPF borrow money abroad.
Review: Moneyball flaws can be found in finance 28 Mar 2014 “The Sabermetric Revolution” debunks some of the numerical analysis craze sweeping baseball. Two Smith College professors expose how many of the stats rely on poor measurement, dodgy theory and small data sets. Even good metrics quickly get arbitraged. Just like on Wall Street.
Intesa’s spring cleaning heralds return to health 28 Mar 2014 Italy’s largest retail bank is taking a massive 6.8 bln euro goodwill hit on the half-dozen mergers that created it. With a new bad bank, that prepares it for the ECB’s stress tests. But the pledge of 10 bln euros in cash payouts is the best sign Intesa is out of convalescence.
Spain’s not-so-bad bank still has much to prove 28 Mar 2014 State-backed entity Sareb, key to the cleanup of the Spanish financial system, has set itself up in record time. It made a small loss in its first year, and 2014 doesn’t look much easier with real estate prices still falling. The bad bank must up its game to make ends meet.
China index: growth cannot cloud judgment on smog 28 Mar 2014 Fresh data shows Beijing smog is no smoggier than before, but the pressure to disperse it has grown. New-found wealth is no substitute for poor health. Now that pollution is an official public enemy, air quality could be a useful target for cleaner growth.
Indonesia poll may not answer investors’ prayers 28 Mar 2014 The nation’s commodities- and consumption-led growth is in doubt. Even so, the stock market is up 10 percent this year on bets a new president will reset south east Asia’s largest economy. But reforms in Indonesia occur at a glacial place. Optimism should be more guarded.
Putin may find more appeal in Arctic than ex-USSR 27 Mar 2014 The eight-member Arctic Council meeting this week may only talk about environmental issues. But the region holds some $17 trln of energy resources. Canada, Denmark and Russia all claim much of it. And Putin has upped his country’s military presence. A storm may lie ahead.
Venezuela’s oil diplomacy is past its sell-by date 27 Mar 2014 The Bolivarian Republic still gives about $9 bln a year in free crude to the likes of Cuba. Even ignoring domestic shortages of staples, that’s enough to cover, say, a year of debt service. With economic cracks widening, President Maduro could start by cutting off this largess.
How to slow runaway executive pay 27 Mar 2014 Pay for top U.S. executives continues to soar relative to both GDP and to middle incomes, raising inequality. Increased activism by shareholders and outsiders could help. So could targeted taxes on bosses and profit. Higher interest rates might also have a role to play.
Baxter puts conscious uncoupling on pharma radar 27 Mar 2014 The $40 bln healthcare giant is separating its biotech and medical products units. Baxter’s spinoff history suggests this latest move will create value for shareholders. This, and the success of Pfizer’s and Abbott’s recent splits, will encourage other pharma giants to follow.
Ken Lewis gets partial comeuppance for BofA mess 27 Mar 2014 The ex-CEO is paying $10 mln and is banned from top public company posts for three years to settle charges over BofA’s purchase of Merrill Lynch. It’s not much, especially with the bank adding another $6.3 bln in legal costs. But it’s a rare example of personal accountability.
UK energy watchdog supercharges breakup option 27 Mar 2014 The possibility of a radical restructuring of energy companies based in Britain just became a probability. A wide-ranging competition inquiry may eventually lead to splitting generation from supply, in line with the original privatisation plan. Centrica is in the crosshairs.
Fed raises bar for Europe’s bank stress tests 27 Mar 2014 The Federal Reserve has found flaws in the U.S. capital plans of HSBC, RBS and Santander. While two American banks also failed the assessment, the focus on process shows the credibility of Europe’s stress tests will depend on more than capital quantum.
Ukraine bailout can work if politics are fixed 27 Mar 2014 The IMF has announced a $14-$18 bln aid package for Ukraine conditioned on medium-term reforms. Kiev will get emergency relief while pain is delayed. But the Fund’s third attempt to help will only work if Ukraine gets a stable and decent government after the May election.