Chancellor: Buffett’s US optimism long-term valid 29 Feb 2016 In his annual shareholder missive, the Oracle of Omaha rejects arguments, by Larry Summers and others, that America has entered a period of “secular stagnation.” However, the Berkshire Hathaway chairman’s optimism looks misplaced for now thanks to distortive monetary policies.
Honeywell and UTC give tour of M&A sausage factory 29 Feb 2016 The potential $160 bln merger is worth $108 a share to United Technologies owners, maybe as much as $134. No, wait, it’s $101. Synergies add $40 bln of value. Or is it $23 bln? Maybe zero. Antitrust aside, the back-and-forth offers a glimpse into the messy process of dealmaking.
Amazon pantry raid should worry UK grocers 29 Feb 2016 The Seattle giant’s move into British fridges, via a deal with Wm Morrison, is starting modestly. Just 5 pct of UK grocery sales happen online, and profit is scarce. But Amazon has three things in its favour: size, a tolerance for low margins, and no pesky real-world stores.
Guest view: Financial storm conditions will worsen 29 Feb 2016 The disruption in international capital flows will only accelerate, says former Citibank exec Bill Rhodes, thanks to China’s slowdown, the continuing collapse of oil prices and diverging monetary policy. It’s going to be a rough ride for global markets and economies.
Angela Merkel opts to enter last chance saloon 29 Feb 2016 The German chancellor has reaffirmed her belief in an open-door policy for migrants. On March 7 she needs a convincing refugee deal with Turkey. Six days later she must limit losses in key regional elections. Without either, her days in the chancellery may be numbered.
EU states could easily balk at data privacy deal 29 Feb 2016 Brussels’ agreement with the U.S. will tighten how Google, Facebook and others handle information. But the EU’s members need to approve it. American efforts to hack iPhones and otherwise relax restrictions on intelligence officials should make the bloc’s residents wary.
Valeant CEO back with less power and no glory 29 Feb 2016 Mike Pearson has returned from illness, stripped of his chairmanship. The $25 bln drugmaker also withdrew guidance and will further delay reporting 2015 results. Marginally better-looking governance isn’t enough to give investors like Bill Ackman hope of reversing losses.
Schwarzman’s riches mostly there for the taking 29 Feb 2016 The Blackstone boss pocketed a breathtaking $800 mln or so last year. Four-fifths of that came from dividends paid by the buyout shop to all owners. Gawking at Steve Schwarzman’s Croesus-like wealth may be good fun, but potential double-digit yields are openly for sale.
Genel shock shows price not oil’s only risk 29 Feb 2016 The Kurdistan oil explorer downgraded one of its largest fields in Northern Iraq, simply because its wells will run dry faster than thought. While today’s oil price matters, so does having enough reserves to still be pumping when prices eventually recover.
China pours more liquidity into a leaky system 29 Feb 2016 The central bank reduced the amount lenders must hold in reserve for the first time since October, even though lending is growing quickly. That suggests policymakers are concerned about the effects of capital outflows. Loans are pouring in one end and trickling out of the other.
Blockchain is a zero-sum game for investment banks 29 Feb 2016 The technology that launched Bitcoin could help broker-dealers cut costs. The catch: it could equally eat into revenue by automating services they currently charge for. Given the formidable obstacles to widespread adoption, it may prove to be as much a curse as a blessing.
Barclays’ problems are bigger than Africa 29 Feb 2016 The UK bank may sell its 62 pct stake in its South African arm. Barclays could do with the capital bump that would generate, but the Johannesburg-listed entity is a leading business in a high-growth market. The group’s investment bank can’t make such grand claims.
Ireland can weather a brief political squall 29 Feb 2016 Angry voters punished the incumbents in a general election, making a hung parliament likely. With no Podemos or Syriza to rip up the economic rulebook and recovery underway, Ireland can afford stasis. But it needs a government before the UK holds its EU referendum in June.
India’s prudent budget favours poor over big firms 29 Feb 2016 Finance Minister Arun Jaitley is sticking to his fiscal deficit target while promising big outlays for farmers. That means no new money for troubled state banks. Corporate taxes were also disappointing. At least Jaitley’s caution leaves room for another interest rate cut.
Buffett fancies himself exception to every rule 29 Feb 2016 The latest missive from Omaha hews to a familiar Oracle tradition. Asset-liability mismatches and unofficial accounting metrics get both mocked and embraced, just like investment bankers, derivatives and tech stocks before them. Homespun wisdom is for lesser investing mortals.
Big economies are ill-equipped for next emergency 29 Feb 2016 That’s the main lesson from the G20 confab in Shanghai. Financial leaders bickered about monetary policy and the scope for more state spending. Host China focused mainly on domestic concerns. Though fears of a crisis look premature, it doesn’t bode well for the next downturn.
Mobile Mario still key to Nintendo’s revival 29 Feb 2016 The console-maker slashed its earnings forecast, blaming a rising yen and weaker sales of devices and games. Currency is a side issue, though. Nintendo’s future rests largely on tapping the huge mobile-gaming market. It has started slowly but has great characters to play with.
Oscars spotlight red carpet for Chinese investors 26 Feb 2016 Tinseltown’s glitziest night is on Sunday, where stars like Leonardo DiCaprio vie for the movie biz’s most prestigious awards. Healthy box-office sales of $11 bln last year belie looming challenges for some studios. Chinese investors are likely to get the runway treatment.
Elizabeth Warren to GOP: Do as I say, not as I do 26 Feb 2016 The Democratic senator has championed the president’s right to pick a new Supreme Court justice this year and the Senate’s duty to consider the nomination. Yet Warren has resisted confirming candidates for office with Wall Street ties. Next time she should take her own advice.
Scalia’s empty seat reverberates beyond Washington 26 Feb 2016 Dow Chemical is paying $835 mln in a decade-old lawsuit that was heading to the Supreme Court. The company decided the conservative judge’s death changed the balance of the outcome and settled. It’s a reminder that politics surrounding the top U.S. bench has real-world effects.
Paris accord weakens Exxon’s proxy defenses 26 Feb 2016 Last December’s UN greenhouse gas deal has led to an increase in shareholder resolutions on global warming, including at the $350 bln oil titan. Investors are striking while the iron is hot. It leaves energy companies with less power to resist demands for more information.
Latam’s poor need institutions more than saviors 26 Feb 2016 Leftist Bolivian leader Evo Morales, in office since 2006, lost a referendum that could have let him preside over the Andean nation until 2025. Self-perpetuation in power, even by pragmatists who slash poverty, shortchanges the poor. Good governance and rule of law matter more.
Deutsche Boerse and LSE try to create Brexit hedge 26 Feb 2016 The new mega-exchange would be London-domiciled with a German CEO, the two groups have confirmed. But they’re establishing a committee to give non-binding advice if the UK exits the European Union. It may be a way to put Deutsche Boerse’s investors at ease without alarming LSE’s.
EU bank dividend stars may fall back to earth 26 Feb 2016 Royal Bank of Scotland says it probably won’t be able to distribute earnings as early as it hoped. But Erste, Societe Generale and Lloyds Banking Group have upped payouts despite profit weakness. The spectre of negative rates may ultimately puncture this year’s dividend euphoria.
Sharp and Foxconn: the secret CEO text messages 26 Feb 2016 The $4.4 bln rescue of the ailing Japanese group is on hold after its Taiwanese buyer said it could not sign the deal - even after Sharp announced the transaction. Foxconn boss Terry Gou is due to meet counterpart Kozo Takahashi. Breakingviews imagines their exchange.
IAG ready to rise above investor scepticism 26 Feb 2016 The British Airways owner’s profitability is ascending into the sphere of top low-cost rivals like easyJet, its 2016 guidance suggests. Yet shareholders still treat the group as an ailing legacy carrier. If CEO Willie Walsh continues to cut costs, he can break through the clouds.
Telefonica needs more than a comeback at home 26 Feb 2016 The Spanish telecoms group is increasing domestic sales and adding customers. But there are headwinds in Brazil, and selling its UK business is crucial to reducing excessive debt. If that effort fails, more drastic measures – like cutting the share dividend – may be in the offing.
Telecom Italia Brazil fix is still possible 26 Feb 2016 Russian investor LetterOne has abandoned a plan to engineer a merger between Telecom Italia’s Brazil division and indebted rival Oi, after TI refused to talk. A deal could still stack up after Oi has cleaned up its debts. The Russians just may not be at the table.
Baidu still searching for local-services profits 26 Feb 2016 China’s top search engine reported better-than-expected sales and rising margins, lifting shares more than 10 pct. Pulling back from online travel helped boost profitability. Still, it is far more important that Baidu delivers on its costly and opaque bet on local e-commerce.
Diageo digs deep to divorce Indian liquor baron 26 Feb 2016 The UK distiller is paying Vijay Mallya $75 mln to step down as chairman of Indian subsidiary United Spirits, and the same again to sponsor his F1 team. That increases the costs of Diageo’s big Indian adventure. Bluechips and emerging markets tycoons can make awkward bedfellows.